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Asia Property Weekly Summary

Core Content

This document provides a comprehensive overview of the Asia property market, including key news updates, market performance snapshots, and investment insights for the week ending July 20, 2014. It focuses on residential and commercial property markets across China, Hong Kong, Japan, India, and Singapore, along with upcoming events and analyst ratings.

Main Market Highlights

China Property Market

• Residential Prices: 55 cities registered month-on-month (mom) declines in home prices in June, compared to 35 in May. 78.6% of cities saw mom price decreases, the highest since January 2011.
• Transaction Volume: 20 cities with data available saw volume increases (median +2%), while 22 out of 33 cities saw mom volume decreases (median -14%).
• Property Investment: Increased by 14.1% yoy in the first half of 2014 to CNY4.2tr (US$677bn), while property sales volume decreased by 6.7% yoy in 1H14 compared to -5.9% in 5M14.
• Taxes: Turnover taxes and deed taxes from the property sector increased by 6.6% and 11.7% yoy, respectively, but growth rates slowed significantly.

Hong Kong Property Market

• Residential Sales: 102 primary residential units sold in the week ending July 20, a 66% drop from the 3-month average of 300 units.
• Secondary Market: Prices rose by 0.01% wow as of July 13, with a 3.6% increase year-to-date (ytd).
• Policy Changes: The Legislative Council passed the Double Stamp Duty law.
• Employment Data: Unemployment rate rose slightly to 3.2% in Apr-Jun from 3.1% in Mar-May. Total number of employed increased by 4,800.
• Kwun Tong Redevelopment: Only four tenders received for the 1,700-unit project.

India Property Market

• Oberoi Realty: 1QFY15 net profit dropped by 37% yoy to Rs643mn, and net revenue decreased by 20% yoy to Rs1,754mn.
• Residential Sales: 482 new private homes sold in June (-68% mom, -73% yoy) compared to 1,488 units in May.
• Delinquency Rates: 4,186 borrowers had delinquent mortgages in May, up 20% yoy. Delinquent borrowers made up 0.82% of total private home loans.

Singapore Property Market

• Residential Sales: 482 new private homes sold in June (-68% mom, -73% yoy) compared to 1,488 units in May.
• Resale Prices: Nonlanded private homes saw a 1.4% mom decline in May.
• Rentals: Private home rentals fell by 0.8% mom in May.
• Residential Inventory: 1,744 units/mth in June, with a 20% increase in unsold inventory.

Japan Property Market

• Condo Supply: Greater Tokyo saw a 28.3% yoy decline in condo supply in June, with an average price of JPY683k psm. Greater Osaka saw a 30.1% yoy decline, with an average price of JPY553k psm.
• Nomura Real Estate: Acquired a 23,200 sqm land plot in Tokyo for JPY13.9bn for a condo development.
• Mitsubishi Electric: Will move to Grand Front Osaka in November 2014, leasing 3 floors (7,392 sqm) with an occupancy ratio of over 60%.

Key Investment Insights

Top Performers

• China (off-shore): 1% 1-wk, 5% 1-mo, -57% 3-mo, -11% 6-mo; P/E 7.0, Dividend Yield 3.7%.
• China (on-shore): 3% 1-wk, 8% 1-mo, 8% 3-mo, 19% 6-mo; P/E 5.5, Dividend Yield 4.0%.
• Hong Kong: 0% 1-wk, 1% 1-mo, 5% 3-mo, 9% 6-mo; P/E 14.3, Dividend Yield 4.0%.
• India Developers: 5% 1-wk, 2% 1-mo, 34% 3-mo, 50% 6-mo; P/E 7.0, Dividend Yield 3.7%.
• Singapore Developers: 1% 1-wk, 1% 1-mo, 1% 3-mo, 9% 6-mo; P/E 15.8, Dividend Yield 2.3%.

Top Buy Ideas (Market Cap > US$2bn)

• Country Garden: 90% upside potential
• China Resources Land: 62% upside potential
• Longfor Prop: 52% upside potential
• Shimao: 49% upside potential
• Aeon Mall Co Ltd: 39% upside potential

Top Sell Ideas (Market Cap > US$2bn)

• Suntec REIT: -24% downside potential
• Gemdale Corp.: -19% downside potential
• Advance Residence: -18% downside potential
• Champion REIT: -18% downside potential
• City Developments: -13% downside potential

Top Buy Ideas (Market Cap < US$2bn)

• Sofia Developers: 34% upside potential
• E-House: 31% upside potential
• Prestige Estate: 23% upside potential
• Home Inn: 18% upside potential
• Phoenix Mills: 6% upside potential

Top Sell Ideas (Market Cap < US$2bn)

• OUE Hospitality Trust: -11% downside potential
• Godreji Properties: -0% downside potential

Upcoming Events

Key Research for the Week

• Nippon Prologis REIT Inc (3283.T): In line with expectations, with rent increases and cap rate decline already priced in; Neutral rating (July 15).
• E-House (China) Holdings Limited (EJ): Expanded online services and reduced cyclical impact; Buy rating (July 16).
• China Real Estate Developers: June new start and investment growth picked up from previous low (July 16).
• Nomura Real Estate Residential Fund (3240.T): In line with expectations, rental market recovering but earnings contribution limited (July 18).
• CapitaCommercial Trust (CACT.SI): In line with expectations, office tailwinds firm, CCT preferred proxy (July 18).
• China Real Estate Market: More stimulation on volume likely, but price stabilization may take time (July 18).

Disclosure

• Goldman Sachs and its affiliates may have conflicts of interest due to business relationships with companies covered in the report.
• This report is for informational purposes only and should not be considered as investment advice.
• For more disclosures, see the Disclosure Appendix or visit www.gs.com/research/hedge.html.

Team Contact

• China Property: Yi Wang, CFA (86) 21-2401-8930; Vicky Li (86) 21-2401-8926; Jacqueline Du (86) 10-6627-3147
• Hong Kong Property: Anthony Wu (852) 2978-0634; Justin Kwok, CFA (852) 2978-0481
• Hong Kong Conglomerates: Simon Cheung, CFA (852) 2978-6102; Frank He (852) 2978-7414; Janet Lu (852) 2978-1642; Alex Ye (852) 2978-6666
• India Property: Puneet Jain (91) 22-6616-9046; Aditya Soman (91) 22-6616-9345; Vipul Prakash (91) 80-6637-8530
• Japan Property: Sachiko Okada (81) 3-6437-9937; Hyou Setsu (81) 3-6437-9907
• Singapore Property: Paul Lian (65) 6889-2464; Jason Yeo (65) 6889-2485; Vincent Lim (65) 6654-5433

Summary of Data Sources

• Bloomberg, Datastream, Goldman Sachs Global Investment Research, Gao Hua Securities Research, Centaline Property Agency, R&VD, China National Bureau of Statistics, China Index Academy, Jones Lang LaSalle, URA, Real Estate Economic Institute, Knight Frank.