UOB Kay Hian: Hong Kong Large-Unit Home Prices Expected to Hold Steady; SHK PPT Named Top Pick

According to a research report from UOB Kay Hian, Hong Kong's property market has been led by large units this year. In the first ten months, residential transaction volume rose 14% year-on-year to 58,564 deals, with primary and secondary transaction value increasing 20.7% and 33.7% year-on-year respectively.

Among these, transactions for units valued between HK$10 million and HK$20 million and above HK$20 million grew 50.7% and 40% year-on-year respectively, while transactions for units worth HK$4 million to HK$10 million rose 16.3%. Transactions for units below HK$4 million fell 9.2% year-on-year.

In the first three quarters of this year, the Rating and Valuation Department's residential price index climbed 7.1%, with prices for Class A to C units and Class D to E units rising 7% and 7.6% respectively. Rental growth for Class D to E units was 8.8%, outpacing the 5.7% increase for Class A to C units.

The brokerage expects future supply to continue shifting toward smaller units, while potential interest rate hikes will compress rental yields. Combined with rising supply, this will weaken the appeal of small units.

The brokerage currently forecasts that small-unit prices will come under pressure next year, while large-unit prices will hold relatively steady. It maintains a "market perform" rating on Hong Kong property stocks.

The brokerage lists SHK PPT (00016) as its top pick, noting that the group's net gearing ratio is only 10.7%, with a forecast dividend yield of 3.8% for the 2027 financial year. It gives the stock a "buy" rating with a target price of HK$143.8.

UOB Kay Hian is also bullish on KERRY PPT (00683), citing its higher exposure to high-end properties and attractive dividends. It expects Branksome Crest in Mid-Levels to be converted from rental to sale by mid-next year, with the project offering 62 units and an estimated total value of over HK$6 billion.

The stock currently trades at a forecast dividend yield of approximately 7.3% for the 2027 financial year. The brokerage also gives it a "buy" rating with a target price of HK$27.8.