Morgan Stanley lowers forecast of Hong Kong residential property price growth this year to 8% from 10%

 

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Hong Kong’s residential prices have rebounded 7% from the trough last December, but are expected to slow down as transaction volume wanes and investment demand weakens, Morgan Stanley said in a note. 

It lowered the forecast of Hong Kong residential property price growth this year from 10% to 8% and said office rents are expected to remain flat this year and grow by 3% next year.

Morgan Stanley downgraded Henderson from Equal-weight to Underweight, while New World Development and Kerry are downgraded from Overweight to Equal-weight. It in turn upgraded Wharf from Overweight to Equal-weight, believing the group may benefit from higher turnover rents due to a strong recovery in tenant sales, and that office rents in Hong Kong will bottom out. It also upgraded Swire Properties from Overweight to Equal-weight.

The bank estimates that the average financing cost for Hong Kong property developers will increase by 80 basis points year over year to 3.9% this year, and the overall interest expense will increase by 23%. For every 100 bps increase in financing costs, the earnings of New World Development, Henderson Land, Wharf REIC and Kerry Property are modelled to be reduced by between 7% and 32% year over year, it said.