Hong Kong residential property market’s post-Covid recovery is short-lived and after an estimated 3% drop in property prices this year, they will decline further by 5% – 10% in 2024, Morgan Stanley said in a note.
Amid rising interest rates in the US and slowing economic growth in mainland China, the broker downgraded Hong Kong local property stocks from Attractive to In-Line, with a preference for developers with low debt and consistently strong revenues.
The market is optimistic about the government’s upcoming Policy Address on October 25, but even if the stamp duty for non-residents is cut from 30% to 15%, the outlook for the property market is unlikely to improve much, it said. Valuations of a few property stocks are attractive, but not enough to drive a run, it added.
Morgan Stanley lowered the target prices for property stocks by an average of 19% to reflect the latest property price forecasts, and inclined its estimate of the sector’s net asset value discount from 45% to 50%.