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Earlier over-optimism in the Hong Kong property market and expectations of a strong recovery are no longer valid, said HSBC Global Research in a report.
Falling property prices, weak demand and a 50 bps hike in mortgage rates may further damage already fragile market sentiment, and property developers in Hong Kong are expected to aggressively cut the prices of new flats to boost sales at the expense of profitability, it said.
HSBC lowered the forecast for Hong Kong’s home prices to flat this year, down from the original forecast of an 8% rise, and expected the price to fall by 5% in the first half of 2024, versus the original forecast of a 4% gain.
Developers rich in cash flow, such as CK Asset and Sino Land are well-positioned to expand their landbanks at a reasonable cost under the current difficult market conditions and they are both rated Buy, but the target price CKA is cut from HK$63.5 to HK$53.1, and Sino Land from HK$11.5 to HK$10.3.
HSBC downgraded its rating on Henderson Land from Hold to Underweight, and cut its target price from HK$20.9 to HK$16.9. It also downgraded Wharf Holdings and Kerry Property from Buy to Hold, cutting the target price of Wharf from HK$21.6 to HK$19.8 and Kerry from HK$21.3 to HK$15.6.