HK Property Prices May Fall By 20% In H1

Source : The Business Times, January 8, 2009

Prices will fall as jobless rate rises, Credit Suisse analysts say

(HONG KONG) Hong Kong residential property prices may fall by about a fifth in the first half of this year, taking the decline from their peak last year to 41 per cent, Credit Suisse analysts wrote in a report.

'Given that prices have already fallen by 23 per cent, we believe the remaining downside for the property market is about 20 per cent,' Cusson Leung and Joyce Kwock, based in Hong Kong, and other analysts wrote in a report dated Tuesday . Prices will fall as the jobless rate rises, they wrote.

The Hang Seng Property Index, tracking six of Hong Kong's biggest developers, has gained 12 per cent this year, amid signs of a rebound in real estate prices and transaction volumes. The gauge slumped 55 per cent in 2008, making it the worst performer among four industry groups within the benchmark Hang Seng Index.

Hong Kong's Land Registry reported this week that the number of residential units sold in December rose 44 per cent compared with November. Still, sales last month were 65 per cent lower than in December 2007.

'We believe it is not time to chase the entire sector now,' Credit Suisse said in the report.

Office rents in Hong Kong are expected to fall this year as vacancy rates climb, Credit Suisse said. Rents in shopping malls may drop as much as 20 per cent as private consumption shrinks, they said.

Cheung Kong (Holdings) Ltd and Sun Hung Kai Properties Ltd, Hong Kong's two biggest developers by market value, remain top picks at Credit Suisse with 'outperform' ratings, the report said. Sun Hung Kai has successfully marketed several projects recently and will start sales on another after the Chinese New Year holiday later this month, the analysts wrote.

Hong Kong landlords Wharf (Holdings) Ltd and Swire Pacific Ltd are also top picks because their offices in less-central locations and prime shopping malls will be relatively less affected than their rivals' will be, the analysts wrote. -- Bloomberg