Tuesday, February 16, 2010

Hong Kong Property Eyes on the Front

HK Property Weekly for the week of Feb 9 – 15, 2010
Physical market quiet before and during CNY: No
new launches this past weekend as Sunday was CNY.
Secondary market was also quiet, partly because of
CNY and also as sellers await: 1) the Yoho Midtown
launch expected the coming weekend; and 2) the
Tseung Kwan O land auction on February 22.

Local media sources say (unconfirmed) HK
Government may raise stamp duty (3.75% to 4.5%)
for apartments >HK$20mn: We believe impact would
be insignificant and limited to the luxury segment.
Demand for luxury housing is supported by strong
buying power and lack of supply, in our view. The impact
on Developer stocks was small in October last year
when the government announced a 40% down-payment
requirement for luxury homes. In addition, bulk of the
primary supply this year will be mass-market products.
High prices and a low land supply policy are here to stay,
in our view.

MTR seeks approval to develop three office
buildings atop GZ-SZ-HK express rail station:
is only acting as the agent for the government; the land
will likely be included in the Application List for auction.
No short-term catalyst given completion is expected in
2020. But, if approved, the project would connect
Kowloon Station and Tsim Sha Tsui to establish a key
alternative CBD to Central in the longer term. Resulting
prime beneficiary will be SHKP, which has significant
investment property exposure atop Kowloon Station.
Stocks driven by wider market movements prior to

CNY: Despite small gains last week, we continue to
believe Developers offer attractive valuation at current
levels. Developers are now trading at a 24% discount to
forward NAV and 2010e P/E of 18.3x; Investors are at a
25% discount to forward NAV and 2010e P/E of 16.0x.


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