Hong Kong Home Prices to Decline as Much as 25%, Bernstein Says

Hong Kong Home Prices to Decline as Much as 25%, Bernstein Says

Hong Kong home prices will fall as much as 25 percent after the government stepped up measures to curb an asset bubble and as banks raised mortgage rates, according to Sanford C. Bernstein H.K. Ltd.

The number of new apartment sales will “remain largely subdued” with developers shifting their focus to cheaper and smaller units to boost sales, analysts led by Kenneth Tsang wrote in a report today.

An index tracking home prices dropped the most in almost three years in the week ended April 14 after the government introduced its toughest yet measures to cool prices on Feb. 22. Prices could fall as much as 20 percent over the next two years, Deutsche Bank AG said in a report last month.

Cheung Kong Holdings Ltd. (1), which last month lowered prices by almost 10 percent at a project in response to the government curbs, may introduce more price cuts to boost sales, said the Bernstein analysts. The builder is controlled by Li Ka-shing, the city’s richest man.The analysts assigned an underweight rating to Hong Kong developers and are advising investors to sell Henderson Land Development Co. because of its “strong competition with Cheung Kong,” and Sino Land Co., which has “large exposure in larger units within its own portfolio.”

Shares of Cheung Kong were unchanged at HK$116.50 as of 11:02 a.m. local time and have declined 2.1 percent this year. Henderson Land rose 1.2 percent to HK$56.70, taking this year’s gain to 3.7 percent, while Sino Land fell 0.3 percent to HK$12.72, extending this year’s loss to 8.8 percent.

The Hang Seng Property Index, which tracks the shares of nine of the city’s biggest developers, rose 0.2 percent and is up 1.3 percent this year, compared with a 2.8 percent drop in the benchmark Hang Seng Index in 2013.

Stamp Duty

Home prices fell 1.41 percent in the week ended April 14, the fourth-straight weekly decline, according to an index compiled by Centaline Property Agency Ltd., Hong Kong’s biggest closely held realtor. It was the biggest drop since May 2010.

Before February’s measures, a housing shortage, low mortgage costs and buying by mainland Chinese helped prices more than double since the start of 2009 even as policy makers attempted to rein in gains amid an outcry over affordability.

The government on Feb. 22 doubled the stamp duty on all property transactions higher than HK$2 million ($257,612), while the Hong Kong Monetary Authority told banks to maintain the risk weighting for new home loans at a minimum of 15 percent to help protect them against a drop in home values.

To contact the reporter on this story: Kelvin Wong in Hong Kong at kwong40@bloomberg.net

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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