HK - Housing 01 (May 08 - Aug 11)

[winston]

DJ MARKET TALK:HK Luxury,Mass-Mkt Property Outlook Negative-Fitch

1107 [Dow Jones] Fitch Ratings says outlook for Hong Kong's luxury and mass-market property negative, reflecting global economic downturn. Notes investment inflows from China dropped substantially, impact of subprime fallout exceeding expectations, with meaningful recovery not expected before 2010.

Michael Wu, Director of Fitch's Asia Pacific Corporate team, says reduced appetite from overseas investors have exerted pressure on market; notes overseas investors need time to recapitalize balance sheets, financial companies unlikely to reinstate headcount in 2009.

Says luxury residential property market will be dominated by end-users with medium-to-low financing requirements, but market likely be subdued as demand-side drivers remain weak.

[winston]

DJ MARKET TALK: HK Mass-Mkt Residential Ppty Risks To Downside-GS

1451 [Dow Jones] Risks to HK's mass residential property prices are towards the downside, Goldman Sachs says following primary transaction volume drop to estimated 9 units sold in week ended Jan. 18 on lack of new launches, ahead of Chinese New Year holidays.

Notes major developers' share prices bounced 26%-58% since mid-November, pricing in moderate transaction volume pick-up, residential price stabilization. But says, with major macroeconomic indicators continuing to trend down, tips reversal of downtrend in developers' NAVs as unlikely, says wouldn't interpret small bounce in transaction volumes as turning point.

"As the share price discount to NAV narrows and implies less cushion to weather further macroeconomic concerns, investors who are looking for short-term gains may be tempted to take profit."

Among Sell rated stocks, Henderson Land (0012.HK), New World Development (0017.HK) on Conviction Sell list; Hang Lung Group (0010.HK) also rated Sell.

[winston]

`Worst is yet to come' for property by Alfred Liu

The worst has yet to come for the property market as asset prices face a downside in at least the next 12 months, a veteran property analyst warns.

"I think the world is facing the worst recession that it has seen in 60 years and this recession is not going to be over quickly," Peter Churchouse, a director of LIM Advisors and chairman of Portwood Capital, told The Standard.

The former Morgan Stanley advisory director said office rents and prices, particularly in prime Central, are going to come down by 50 to 60 percent from their peak at the middle of last year to the end of this year as the office market is "in a huge bubble." The supply of office space is limited but banks and accounting firms are having a difficult time for business, he said. "I wouldn't be buying right now for office. No way."

Churchouse expects residential prices to fall by 15 to 20 percent, with the luxury market particularly hit. He predicts revenue from land auctions will remain thin this year. "In the first few months of the year ... [developers] will be reluctant to put their hands up for properties through the land auction," he said, adding the sector would gain more interest in the second half if the global economy gets a little better.

Last year only a small site in Pak Sha Wan, Sai Kung, was triggered for land auction in Hong Kong, by HK$16.5 million, at an accommodation value of HK$13,350 per square foot. Churchouse believes the government is not tightening its land policy, but that developers are not bidding for land sites as they have been more keen to invest in the mainland.

Meanwhile, he expects lenders to keep mortgage rates at a low level and that banks are unlikely to go to prime plus, a premium to the best lending rate, in the next six to 12 months at least, as people are reluctant to borrow.

Churchouse said he is adopting a "stop-gap measure" for stock investment as "there's no chance of a new major bull market in the short term."

He added: "In the short term, I am not fully invested. My portfolio is only like 40 percent invested or less than that." He prefers high dividend-producing real estate investment trusts, corporate debt and gold.

[millionairemind]

February 2, 2009, 5.33 pm (Singapore time)

HK's negative equity cases more than quadruple in Q4

HONG KONG - The number of Hong Kong mortgages in negative equity quadrupled in the final months of last year as property prices tumbled, authorities said on Monday.

The estimated number of residential mortgage loans in negative equity jumped to 10,949 cases over the three months to December, from 2,568 cases in the third quarter, the Hong Kong Monetary Authority said in a statement.

The percentage of mortgage borrowers in negative equity increased from 0.5 per cent to 2.3 per cent, the figures showed.

The value of the problem loans rose to HK$24.8 billion (US$3.18 billion) up from HK$6 billion in the third quarter. The unsecured portion of the loans also increased to HK$2.7 billion from HK$400 million.

Demands for both residential and commercial properties have fallen substantially on the back of job cuts. Hong Kong slipped into recession in the third quarter, government figures said.

The number of negative equity cases remains far from Hong Kong's historic high of 106,000 in the second quarter of 2003.

At the time, the property market was still trying to recover ground from the 1997 Asian financial crisis, when Hong Kong was further hit by the outbreak of Severe Acute Respiratory Syndrome. -- AFP

[winston]

DJ MARKET TALK: HK Ppty Shares Lag; More Downside Expected - DBS

1047 [Dow Jones] HK property stocks underperform vs HSI's 1.4% rise, as sentiment affected after sharp rise in negative equity mortgages in HK in 4Q; Hang Seng Properties subindex down 1.4% at 16,595.67. Despite sharp falls in these stocks since 1H08 (subindex down 34.6% vs end-June level), Peter Lai at DBS says more downside expected, as local property prices tipped to fall around 20% in 2009, with economic downturn, rising unemployment rate souring local property market outlook.

Suggests investors avoid sector. Cheung Kong (0001.HK) down 1.7% at HK$69.30, Henderson Land (0012.HK) down 0.5% at HK$28.75, Hang Lung Properties (0101.HK) down 3.5% at HK$16.96, Sino Land (0083.HK) down 1.4% at HK$7.08, while Sun Hung Kai Properties (0016.HK) down 0.1% at HK$67.90.(SUT)

[winston]

DJ MARKET TALK: HK Developers' Outperformance Unsustainable -GS

1227 [Dow Jones] Goldman Sachs tips underlying earnings for HK's major developers range from 74% on-year fall to 360% rise, with reporting season to start from Feb. 10; expects major landlords to report 2% fall to 89% rise in underlying earnings.

"Due to the lagging effect of lease renewals and property presales, we would not see the full negative impact of the macroeconomic downturn on this set of results," says Goldman. Adds, developer stocks outperformed investor stocks by 13% over past two months, but this unlikely to sustain amid general economic downturn.

Rates Henderson Land (0012.HK), New World Development (0017.HK) and Hang Lung Group (0010.HK) at Sell;

Buy on Great Eagle (0041.HK) and Kerry (0693.HK);

Neutral on Sun Hung Kai Properties (0016.HK). Hang Seng Property Subindex +0.2% at 15,961.29 vs HSI's 2.4% rise.(

[winston]

DJ MARKET TALK: HK Landlords Not Defensive; Abundant Supply-UOBKH

0916 [Dow Jones] UOB KayHian says HK landlords not defensive as more downside tipped for office rents than residential prices. "The abundant supply in the new business districts will be a serious threat to existing rents, particularly when cost-cutting is now a main corporate initiative," says UOB.

Adds, landlords' more resilient 2009 earnings will not make them more defensive as their share prices track spot rents. Keeps Underweight on HK property sector. Says while sector's shares are trading above house's targets, sees more downside for Hysan (0014.HK), Wharf (0004.HK). Adds, while Great Eagle (0041.HK) cheap vs peers, past month's outperformance could trigger selling pressure if stock market weakens; rates at Hold, target HK$8.45.

Among landlords, Great Eagle ended up 0.2% at HK$9.62 Friday, Swire (0019.HK) +4.0% at HK$47.65 and Wharf (0004.HK) +1.7% at HK$17.96.(

[winston]

DJ MARKET TALK: HK Property Shares Down; Weak Outlook -Tanrich

1113 [Dow Jones] HK property stocks lower amid weak outlook with property prices tipped to fall 10%-20% in 2009 vs 2008 by some analysts due to rising unemployment rate.

Jackson Wong at Tanrich says these stocks are likely to remain weak, with weakening economic outlook to dampen interest in sales of residential units. Adds, not surprising to expect further rise in number of negative equity mortgages.

The Standard report today cites Pan Asian Mortgage Advisory as forecasting number of negative equity cases to climb to 20,000-25,000 if property prices fall further 10%-15%, but still distant vs 106,000 cases in June 2003 during SARS outbreak.

Within sector, Hang Lung Properties (0101.HK) down 4.6% at HK$14.60, Sun Hung Kai Properties (0016.HK) down 3.3% at HK$62.15, Cheung Kong (0001.HK) down 3.4% at HK$65.65

[winston]

Home Prices on Hong Kong’s Peak Fall Most in Decade (Update2) By Chia-Peck Wong

Feb. 17 (Bloomberg) -- Home prices on the Peak, Hong Kong’s most-expensive residential area, had their steepest decline since the Asian financial crisis a decade ago, real estate agency CB Richard Ellis Group Inc. said.

Prices slumped 30.5 percent in the fourth quarter of 2008 from a year earlier as the recession damaged demand, the biggest drop since the third quarter of 1998’s 45 percent, said Margaret Ng, senior director of Greater China at CB Richard Ellis.

The deteriorating economic outlook and mounting job cuts in Hong Kong have curbed demand for real estate and led potential buyers to wait for prices to drop. Hong Kong’s Hang Seng Index and China’s stock market have both dropped almost 60 percent since their October 2007 peaks, cutting into homebuyers’ wealth.

“In early 2008, prices went really crazy because of stock market gains,” Ng said in a phone interview yesterday. “Many Chinese also had money from IPOs in Hong Kong, and when they get rich, the first place they look to buy is the Peak.”

Hong Kong’s jobless rate rose to 4.1 percent in the fourth quarter, the highest level in 15 months. The number of luxury homes, defined as those worth at least HK$10 million ($1.3 million), changing hands fell 65 percent to 258 in January from 734 a year earlier, Land Registry figures show.

Prices fell to an average of HK$16,678 a square foot in the fourth quarter on the Peak, erasing almost all gains posted since mid-2007, Ng said. In the second quarter, prices surged to an average of HK$30,413 a square foot, she said. A house in Sun Hung Kai Properties Ltd.’s Severn 8 project sold for a record HK$55,000 a square foot in the first half of last year.

Second-Most Expensive

Overall, luxury home prices in Hong Kong, including the Peak, Jardine’s Lookout, Island South and Mid-Levels, fell 19.2 percent in the fourth quarter from a year earlier, CB Richard Ellis said. Hong Kong has the second-most expensive luxury home prices in Asia, at an average of $16,125 per square meter, after Tokyo, according to the Global Property Guide Web site.

Even with the recent decline, luxury prices are unlikely to fall to lows posted during Hong Kong’s severe acute respiratory syndrome epidemic in 2003, because buyers are richer and managing risks better, Ng said. Prices on the Peak averaged HK$6,346 a square foot in the third quarter of 2003, she said.

“The delinquency ratio on mortgages is falling, and yet home loans are rising: this shows it’s not an unhealthy market,” Ng said. “We don’t see people dumping their property at really cheap prices and Hong Kong people have gotten rich enough to prefer to hold on for price recovery instead of selling.”

Fourth-quarter prices were also 63.4 percent higher than the average HK$10,206 a square foot fetched at the Peak in the third quarter of 1998, she said.

Little Delinquency

The value of new Hong Kong mortgages rose 22.8 percent in December from November, the city’s monetary authority said last month. The delinquency ratio on home loans was unchanged at 0.05 percent, it said.

Still, the unknown length of the financial crisis and the possibility of more job cuts weigh on luxury property prices, according to Ng.

“We need to look at one to two more quarters of unemployment figures,” she said. Homeowners may be forced to sell at low prices if they are “desperate,” she said.

Rents on the Peak fell only 3 percent in the fourth quarter from a year earlier because tenants there are usually senior managers of major foreign companies, Ng said. Luxury rents dropped the most in the Mid-Levels district, 10.8 percent, as most expatriate tenants there are at more junior levels and some were laid off or had housing allowances cut, she said.

Hong Kong’s economy shrank a seasonally adjusted 0.5 percent in the third quarter of 2008 from the previous three months, after contracting 1.4 percent in the second quarter. Figures for the fourth quarter are due Feb. 25.

[winston]

DJ MARKET TALK: HK Ppty Shrs Down; Citi Tips Significant Downside

1054 [Dow Jones] HK property sector hurt by HK's higher-than-expected unemployment rate, with property subindex down 2.1% vs HSI down 1.6%. Citigroup says its analysis shows "meaningful historical correlation" of negative 0.74 between unemployment and HK property prices.

With weakening fundamentals, continuous de-rating of financial industry, spillover effect on other industries, rising cases of negative equity, accelerating unemployment, expects "more significant downside" in HK property prices, rentals as more property sellers, landlords "start to accept reality;"

top Sell remains SHK Properties (0016.HK). SHKP down 1.9% at HK$61.05; high-beta Midland (1200.HK) off 4.2% at HK$2.06