Two major banks sang good Hong Kong property prices

In recent months, the property market in Hong Kong has picked up, and Bank of America Merrill Lynch and Goldman Sachs have joined the ranks of singing. Bank of America Merrill Lynch originally predicted that residential property prices will fall by 5 to 10% this year and increase to 5% this year. Goldman Sachs originally estimated that Hong Kong residential property prices will fall by 5% each year in the next three years. It is flat, and it will rise by 3% each year next year and the following year. However, both brokerages believe that the recent rise in real estate stocks has already reflected most of the good news, and investors are urged to choose real estate stocks with solid earnings growth and catalysts.

The major banks have successively raised their forecasts for the Hong Kong property market this year.

Bank of America Merrill Lynch is estimated to rise 5% this year

Bank of America Merrill Lynch said that it was expected that property prices in Hong Kong would stabilize in May and February after adjusting for 5 to 10% in January and February. However, the adjustment of the property market was milder than expected, and residential property prices began to recover in February. The Fed has become more and more “doves” and the Mainland has relaxed credit. The Hang Seng Index has risen by nearly 16% during the year, which is also beneficial to the property market. Therefore, the bank raised its forecast for residential property prices to 5% this year. Rents have also been flat from the original forecast and have been raised to a rate of 0 to 3%. Office rents are expected to fall from a forecast of 5% to no rise and fall next year.

Brokerage rating and target price of real estate stocks

In addition, as the exchange rate of the RMB rebounds, the bank will also increase its high-end retail sales growth in Hong Kong this year, from the original forecast of 5 to 10%, to an increase of 5 to 8%. Maintain retail store rents between 0 and 5% this year. Forecast of the increase.

However, Bank of America Merrill Lynch believes that real estate stocks have been slumping 35% since the fourth quarter of last year. After more than a year, the stock market has rebounded after the bottom of the property market. The stock price of real estate stocks has mostly reflected no interest rate increase and private land supply continues to be low. Positive news such as the recovery of property prices and property market turnover. The bank is more bullish on real estate stocks with catalysts and growth prospects higher than the market average. Hang Lung Properties (00101), Cheung Kong Group (01113) and Henderson Land (00012) are preferred, but Champion REIT (02778) has an investment rating. Down to neutral.

Goldman Sachs also pointed out that the market will suspend interest rate hikes in the market, and the low interest rate environment will continue. The bank expects the Fed to raise interest rates once in the next year and the following year, which will benefit the Hong Kong property market. In addition, the Hong Kong Government has changed the proportion of public and private residential land supply to 7:3. The market is concerned about the long-term or tight supply of private houses. The change in these two factors has caused the property market in Hong Kong to improve this year and the pace of economic recovery in the Mainland is better than expected. Therefore, the Bank has raised its forecast for Hong Kong property prices in the next three years.

The Bank will continue to closely monitor the new sales methods of the Hong Kong Government in the implementation of the vacancy tax and the tightening of tenders in the coming months. More small and Mainland developers participating in the property market in Hong Kong will intensify competition. At the same time, the Government will re-enter the market in May. The launch of about 5,000 HOS flats will also become the focus of the market.

Individual property stocks were downgraded

However, Goldman Sachs believes that the discount rate of property stocks to net asset value per share has narrowed from 53% to only 40%, and the average level after returning to a wide range is recommended. Henderson Land’s investment rating rose to neutral, but Hang Lung Properties and New World Development (00017) were downgraded to neutral and sale, respectively.

In fact, the major banks have successively raised their forecasts for the Hong Kong property market this year. Among them, Citigroup has already expected the property market in Hong Kong to bottom out in the first quarter. The demand for home ownership will be released after the Lunar New Year. The annual property price is expected to rise by 5%. Morgan Stanley expects that the pace of interest rate hikes is slower than expected. This year, property prices in Hong Kong rose by 2%, and the volume of first-hand houses increased by 10%. Another Yamato also lowered its forecast for this year’s property prices from 3% to steady.