Hong Kong home prices may need to drop by 20% before rental return can be raised to 4.13% – UBS

 

>>REAL-TIME UPDATES IN THE WIRE. CLICK HERE<<<

 

 

The higher H-rate caps on mortgages by local banks will prompt a further drop in Hong Kong property prices, UBS said in its report. 

Assuming residential rent grows by 10% due to higher population inflow and there is no rate cut in 2024, UBS kept its forecast that Hong Kong residential price may need to drop 20% to shore up existing gross rental yield from 3% to 4.13%, under its latest intact effective mortgage cost. 

Eeffective mortgage cost needs to drop 0.75 percentage points so as to deliver a flattish residential price in 2024, showed UBS calculations.

Amid a cautious market, UBS projected low gearing developers such as CK Asset and Sino Land, as well as landlords with dividend payout policies, such as LINK REIT and WHARF REIC, to outperform the market. 

SHK PPT’s share price plunged nearly 10% on Monday mainly due to the disappointment of its target to lower the dividend payout ratio from 60% to 40% – 50% for fiscal year 2024, which is reasonable as more cash could be retained to provide flexibility in balance sheet management under rate hike environment, UBS said.