HK - Housing 01 (May 08 - Aug 11)

[winston]

Home and office double whammy hits developers
Alfred Liu
Monday, August 11, 2008

Hong Kong developers have been hit by the double whammy of weak buying sentiment in the residential property market and rental declines in commercial property.

Only 80 new flat sales are expected to be recorded in July - a drop of 80 percent from 400 units sold the previous month. Transactions of secondary homes are expected to slump 27 percent month- on-month to 5,300 units, said JPMorgan analyst Raymond Ngai. "The bad sentiment in the market prompted developers to delay [their launch plans]," he said.

Ngai also said office capital value and rents - especially in Central - are more susceptible to the current volatile stock market outlook. "We would prefer property stocks with less exposure on rental properties," Ngai said.

[winston]

Shrinking deposits may force mortgage hike
Stephanie Tong and Benjamin Scent

Hong Kong banks might hike mortgage rates soon if customer deposits continue to shrink.

"If deposits fall further and the Hong Kong interbank offered rate [HIBOR] continues to rise, local banks may hike mortgage rates and cut special offers to customers," said Hang Seng Bank (0011) vice chairman Raymond Or Ching-fai. "Hong Kong dollar saving deposits have been falling in the past six months."

In June, Hong Kong dollar deposits fell 2.1 percent to HK$2.872 trillion, from HK$2.935 trillion at the end of May, according to the Hong Kong Monetary Authority.

"I think a major reason is the massive capital outflow from Hong Kong," said Citi economist Joe Lo.

Overseas investors sold off many of their holdings in Hong Kong equities and repatriated their funds out of Hong Kong, Lo said.

"If the trend continues, there will be pressure on the banks in Hong Kong to increase the lending rate to offset the higher cost of funds.

"Banks might increase their lending and deposit interest rates before the end of the year, even if the US Federal Reserve holds the policy rate unchanged."

This massive outflow of funds from the Hong Kong banking system is one reason why Hong Kong banks' loan-to- deposit ratio increased sharply this year to 81.9 percent as of the end of June, up from 71 percent at the end of December, according to the HKMA.

"If deposits fall further, banks may have to turn to the interbank market for funding. But HIBOR was rising, raising local banks' funding costs," said BOC (Hong Kong) (2388) head of mortgages Lam Kam-yu. "Banks are under pressure to increase mortgage rates."

Three-month HIBOR was at 2.13 percent yesterday, up 26 basis points in the past three months.

BOC (Hong Kong) currently has no plans to raise mortgage rates. But Lam said the bank will review its mortgage rate if its peers raise the home-loan rate.

[winston]

Flat sales set for September boost
MandyLo

While total home transactions in August may drop 27 percent from the previous month, property agencies say they expect the real estate market to rebound in September, boosted by favorable response to new residential projects, with more units to be launched shortly.

The estimated total registration of transactions in August is 6,500, compared to 8,930 registrations in July, said Midland Realty (1200) chief analyst Buggle Lau Ka-fai.

But he forecast new projects may boost the registration number by 15 percent to 7,500 this month.

Additional supply of new residential units may increase after the successful launching of Le Bleu Deux in Tung Chung by HKR International (0480), Kerry Properties' (0683) SOHO 38 in Central, and Sino Land's (0083) One Madison in Cheung Sha Wan, Lau said.

HKR International said it has sold 363 units at Le Bleu Deux since it was launched two weeks ago, including 101 units that sold Saturday and Sunday at an average price of HK$4,900 per square foot.

HKR has reaped HK$1.56 billion from the project so far. Meanwhile, One Madison and SOHO 38 sold about 25 units and 30 units on the weekend, said market sources.

Up to last Thursday, the number of residential property registrations in the primary market for August slumped 53.7 percent to 176, compared to the 380 deals for the first 28 days of July, said Patrick Chau Moon-kit, head of research at Ricacorp Properties.

Total consideration of the August registrations plunged 80.5 percent to HK$1.04 billion from HK$5.33 billion the month before. New projects expected to hit the market soon include Wheelock Properties' (0049) The Babington, Cheung Kong's (0001) Seasons Monarch, and Sun Kung Kai Properties' (0016) phase two of The Vineyard.

[winston]

HK Properties

From Dr. Check:-

Property derivatives. In February last year Sun Hung Kai Financial and ABN Amro jointly executed the market's first Asian property derivative based on Hong Kong residential property.

This derivative was based on Hong Kong University's Hong Kong Island Residential Price Index - a sub-index of the university's Real Estate Index Series which draws on prices of real estate transactions. The HKU index reflects the performance of the entire property sector.

Property investment requires expenses such as stamp duties, legal and agents' fees, as well as maintenance costs. In a bearish market, these add-ons could be a heavy burden.

But property derivatives are an alternative way to invest in local real estate at a relatively low transaction cost. Investors no longer need to worry about problems that come with actual ownership of a property.

[winston]

August flat sales plunge 54pc as buyers hold off
MandyLo

Amid a global economic slowdown and a volatile stock market, Hong Kong home transactions in August plunged 54 percent year-on-year to a 31-month low of 5,284, according to Land Registry statistics released yesterday.

Transactions for flats fell 28.9 percent to around 2,148 from 7,433 in July.

"The low level of transactions in August reflected the declining property market in the turbulent economy and stock market since July," said Willy Liu Wai-keung, executive director of Ricacorp Properties.

It was also a result of almost no new projects being launched in July, Liu said.

With more property projects being launched this month, residential property transactions are expected to reach 6,800 in September, he added.

Consideration for residential units fell 59.3 percent to HK$14.97 billion from HK$36.76 billion in August 2007, down 40.4 percent from HK$25.14 billion in July, according to the Land Registry statistics.

There were 193 transactions in the primary market, down 51.1 percent, and 4,332 flats changed hands in the secondary market, a decline of 28.6 percent from 6,063 in July, said Wong Leung- sing, associate director for research at Centaline Property Agency.

Investors and end-users are cautious about flat prices in the static property market, which pushed consideration for primary and secondary transactions in August down by 80 percent and 31 percent from July, Liu said.

He expects trading to revive as investors return to the market after the Olympics and their summer vacations.

"Transactions in the secondary market are estimated to leap 20 percent this month, and property may stop falling," Liu said.

Building unit deals slumped 53.1 percent to 6,402 from 13,664 a year earlier, lower than the 6,500 deals projected by Midland Realty (1200).

[kennynah]

anyone knows what a condo unit size of (1000 sq feet) at "half mountain" will roughly cost how much now?

[winston]

BROKER CALL -Goldman Sachs turns 'cautious' on Hong Kong property sector

HONG KONG (XFN-ASIA) - Goldman Sachs said it has downgraded its view of the Hong Kong property sector to "cautious" from " neutral" to price in falling net asset values.

It also lowered its price targets for several developers by 22-38 pct.

"In the secondary market, we now look for flat residential prices in 2008, meaning a 5 pct drop for the rest of the year to offset the 5 pct rise year-to-date, and a further 10 pct drop in 2009," the brokerage said.

It had previously forecast a 20 pct price rise for the secondary market this year and zero growth in 2009.

Goldman Sachs now factors in a 10 pct price cut by local developers by end-2009 to capture a potential narrowing of the primary market price premium over secondary market prices.

"A prolonged consolidation in residential market activity would put the abnormally high primary-secondary market price premium at risk," it said.

It added that a faster-than-expected decline in GDP growth, coupled with weakening residential rental growth and fading wage growth expectations, led it to downgrade its view on the developers.

"We have cut our 12-month NAV-based target prices by 22-38 pct to capture the risks of slower asset turnover rates, prolonged macroeconomic uncertainty, and a further narrowing of the primary-secondary market price gap," it noted.

Goldman Sachs downgraded Sun Hung Kai Properties to "neutral" from "buy" and cut the target price to 94.3 hkd from 148.3.

It also cut Henderson Land to "sell" from "neutral" and lowered its target to 38.5 hkd from 59.6.

Hang Lung Properties and Sino Land were maintained at "neutral", but their targets were cut by 24 pct to 20.4 hkd and by 38 pct to 11.5 hkd respectively.

[winston]

SOUTH CHINA MORNING POST

Affluent mainland investors who borrowed heavily to pay peak prices for properties in Hong Kong last year are struggling to finance their deals and are being forced to walk away to cut their losses.

[winston]

China property tipped for 'meltdown'

China's property market could be headed for a "meltdown'' as home prices and sales decline, and bank earnings will be affected, according to Morgan Stanley.

"Property prices are already cracking in China in major cities,'' wrote Morgan Stanley analysts led by Jerry Lou in a note.

"We believe the likelihood of a property sector meltdown is high. The impact on banks' earnings may be substantial.''

Morgan Stanley has an "underweight'' on financials, which include banks and properties.

BLOOMBERG

[winston]

Global turmoil may take 15pc off flat prices
Alfred Liu

Local residential property prices are expected to fall by 10 to 15 percent over the next 12 months amid the volatile global stock markets and dimmer economic prospects.

"The negative spillover attributed to the problem of the global credit crunch and the recent collapse of Lehman Brothers has prompted more vendors to reduce their asking prices," said Piers Brunner, managing director at property consultant Colliers International.

Midland Realty said there were only 20 deals over the weekend in the 10 largest housing estates, a decrease of 38 percent from the previous weekend.

"Some buyers are cautious amid the global market volatility, slowing weekend property transactions," said Midland Realty director Gary Yeung Wing- kin.

"The market is still dominated by end-users and some owners are more willing to negotiate prices with buyers."

The New Territories recorded 11 secondary transactions over the weekend, while the Kowloon side had five.

"I expect property prices in the secondary residential market to fall 5 percent to 8 percent by year end from now," said Richard Lee Chi-shing, executive director of Hong Kong Property Services. "Owners are cutting prices as transactions have been falling."

For the primary residential market, only about four deals, including three homes at HKR International's (0480) Tung Chung project Le Bleu Deux, were recorded over the weekend.

Until September 17, there were 13,158 home deals in the secondary market in the third quarter amounting to a total of HK$40.4 billion, according to Wong Leung-sing, a director of research at Centaline Property Agency. He expects secondary transactions in the third quarter to decrease 28.3 percent to 15,240 from the previous quarter, and consideration to drop 31.2 percent to HK$47.6 billion.

Until September 17, third-quarter transactions stood at 920 in the primary housing market, amounting to HK$8.39 billion.

Wong expects primary home transactions in the third quarter to fall 54.8 percent from the previous quarter to 1,180, with consideration sliding 67.6 percent to HK$9.6 billion.