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HK Property Market Summary (July 2013)

Core Content Overview

This report provides an analysis of the Hong Kong property market as of July 2013, focusing on residential, office, retail, and investment trends. It highlights key developments, transaction data, and valuation metrics for major developers, property investors, and REITs.

Main Points and Key Information

Residential Market Trends

• Primary Market Activity: Major developers have resumed new project launches following the implementation of a new ordinance. The response has been favorable, with significant sales.
  • Kerry Properties' Bayview: Launched in To Kwa Wan, 152 out of 175 units sold (87%), at an average selling price of HK$15,000 per square foot.
  • New World Development's The Woodsville: Launched in Yuen Long, 142 out of 236 units sold (60%), at HK$8,000 per square foot.
  • Henderson Land's The Reach: Re-launched in July 2013.
• Secondary Market Activity: Continued demand for mass market projects is observed, with solid transaction volumes and values.
• Occupation Permits: Issued for a single unit in 37 San Shek Wan on Lantau Island by a private developer.

Upcoming Projects

• Pre-sale Consent Granted (June 2013):
  • TCTL 37: Nan Fung Group, 1,419 units, on Lantau Island.
  • The Rise: 402 units, in Kwai Chung.
• Pre-sale Consent Pending Approval (June 2013):
  • The Nova: COLI/URA, 255 units, in Sai Ying Pun.
  • SIL 850: Hong Kong Housing Society, 274 units, in Shau Kei Wan.
  • The Avenue: Sino Land/Hopewell/URA, 1,118 units, in Wan Chai.
  • IL 9007 (Phase 1): Wharf/Nan Fung Group, 19 units, in The Peak.
  • NKIL 6306: Kerry Properties, 41 units, in Kowloon Tong.
  • Park Metropolitan: Sino Land/URA, 299 units, in Kwun Tong.
  • MacPherson Place: Kowloon Development/URA, 293 units, in Mong Kok.
  • NKIL 6494 RP: 402 units, in Sham Shui Po.
  • The Austin: New World Development/Wheelock, 576 units, in Tsim Sha Tsui West.
  • Lot 385 RP & Exts in DD 352: CITIC Pacific/Hong Kong Realty International, 102 units, in Discovery Bay.
  • FSSTL 202: SHKP, 144 units, in Fanling.
  • Lot 245 in DD 331: Sino Land, 16 units, in Lantau.
  • Lohas Park Package 3: 1,648 units, in Lohas Park.
  • Double Cove Ph 2: Henderson Land/New World Development, 865 units, in Ma On Shan.
  • Mont Vert: 1,350 units, in Tai Po.
  • TPTL 200 & 201: Sino Land/K Wah International, 545 and 546 units respectively, in Tai Po.
  • City Point: 1,717 units, in Tsuen Wan.
  • Century Gateway Ph 2: SHKP, 911 units, in Tuen Mun.
  • 1 Tsing Lung Road: Manhattan Realty, 75 units, in Tuen Mun.
  • Park Signature: New World Development, 1,620 units, in Yuen Long.
  • Lot 421 in DD 127: New World Development, 98 units, in Yuen Long.

Valuation and Performance

• Property Developers:

  • Hang Lung Group: Market cap HK$53bn, last price HK$39.50, 12-m target HK$46.95, recommendation "Buy".
  • Hang Lung Properties: Market cap HK$112bn, last price HK$25.10, 12-m target HK$30.10, recommendation "Buy".
  • Henderson Land: Market cap HK$130bn, last price HK$48.55, 12-m target HK$49.70, recommendation "Hold".
  • Kerry Properties: Market cap HK$47bn, last price HK$32.30, 12-m target HK$36.40, recommendation "Buy".
  • Sino Land: Market cap HK$66bn, last price HK$11.08, 12-m target HK$14.80, recommendation "Buy".
  • SHKP: Market cap HK$276bn, last price HK$103.30, 12-m target HK$124.60, recommendation "Buy".

• Property Investors:

  • Great Eagle: Market cap HK$19bn, last price HK$29.45, 12-m target HK$38.80, recommendation "Buy".
  • HK Land: Market cap HK$16bn, last price HK$6.75, 12-m target HK$7.94, recommendation "Buy".
  • Hysan Development: Market cap HK$35bn, last price HK$32.65, 12-m target HK$38.45, recommendation "Buy".
  • Swire Properties: Market cap HK$137bn, last price HK$23.40, 12-m target HK$27.80, recommendation "Buy".
  • Wharf: Market cap HK$204bn, last price HK$67.20, 12-m target HK$71.20, recommendation "Buy".

• REITs:

  • Champion REIT: Market cap HK$19,547m, last price HK$3.43, 12-m target HK$3.75, recommendation "Hold".
  • Yuexiu REIT: Market cap HK$11,037m, last price HK$4.01, 12-m target n.a., recommendation "NR".
  • Hui Xian REIT: Market cap HK$20,634m, last price HK$4.03, 12-m target n.a., recommendation "NR".
  • Link REIT: Market cap HK$87,024m, last price HK$38.00, 12-m target HK$41.70, recommendation "Buy".
  • Prosperity REIT: Market cap HK$3,316m, last price HK$2.39, 12-m target HK$2.68, recommendation "Buy".
  • Regal REIT: Market cap HK$7,492m, last price HK$2.30, 12-m target n.a., recommendation "NR".
  • Sunlight REIT: Market cap HK$5,140m, last price HK$3.18, 12-m target HK$3.52, recommendation "Buy".

Share Price Performance and Metrics

• Price to Book NAV Band: For REITs, the average is around 0.6 to 1.3x.
• Discount to NAV: Varies from -66% to -12% across developers.
• Yield: Ranges from 2.0% to 4.9% for developers and 2.2% to 6.3% for investors.
• PE Ratios: For developers, FY13 PE ranges from 6.1x to 32.0x; for investors, FY13 PE ranges from 10.3x to 32.0x.

Market Influencing Factors

• Real GDP Growth: Affects overall economic activity and demand for real estate.
• Unemployment Rate: Indicates labor market health and purchasing power.
• HIBOR vs Prime Rate: Reflects financing costs and market sentiment.
• Effective Mortgage Rate: Influences affordability and buyer interest.
• Housing Affordability: Private households' ability to purchase homes.
• Rental Yields: For mass market projects, around 2.2% to 4.5%.
• Yield Spread: Differential between mortgage rates and rental yields, indicating market efficiency.

Key Charts and Data

• Primary and Secondary Market Transaction Volumes and Values: Showed positive trends in July 2013.
• Confirmor Index: Reflects market confidence, with positive readings in secondary markets.
• Centa-City Leading Index: Indicates secondary market price movements.
• Residential Rents: Continued growth in some areas.
• Office Market: Data on office rentals, capital values, and vacancy rates showed steady performance.
• Retail Market: Private retail rent and price indices were tracked for insights into market dynamics.

Important Dates and Outlook

• Upcoming Project Launches: Several projects are set for launch or pending approval in the second half of 2013.
• Market Outlook: Developers and investors are advised on buying or holding based on current valuations and market conditions.
• Discount to NAV and Yield Bands: Provide insights into valuation levels and potential returns.

This summary encapsulates the key aspects of the Hong Kong property market in July 2013, including project launches, market performance, valuation metrics, and influencing factors.