‘S’pore property stocks more attractive as HK nears slump’
HONG KONG: Hong Kong’s property stocks are cheaper than Singapore’s, although not cheap enough to account for the risk that the world’s least affordable city could have a housing crash.
That’s according to analysts and money managers from Nomura Holdings Inc to Janus Henderson Group Plc. In Singapore, some are seeing signs of a market bottom after years of home price declines.
Hong Kong, where any let-up in government cooling measures looks unlikely in the short-term, may be teetering on the edge of a slump, with Morgan Stanley among those seeing a risk of multi-year declines.
The upshot: while Hong Kong developers’ shares are cheaper across a range of measures, their Singapore peers look more attractive.
“The consensus is that Hong Kong’s housing prices may have more downside risk than upside,” said Joyce Kwock, an analyst at Nomura Holdings.
One valuation gauge shows that Hong Kong developers are trading at larger discounts to net asset value than peers in Singapore, with shares of Henderson Land Development Co at about a 54 per cent discount compared with City Developments Ltd’s 20 per cent, said Bloomberg.
Singaporean real estate owners and developers have outperformed this year, gaining 33 per cent in their first rally after four years of declines, compared with a 24 per cent increase for Hong Kong peers, based on Bloomberg Intelligence indices.
Hong Kong home prices have shot ever higher, while Singapore residential prices have declined 12 per cent from a peak, dropping for 15 straight quarters.
A 70 per cent divergence in home prices in Singapore and Hong Kong over the past six years is due for a reversal, according to Morgan Stanley.
Singapore developers score better in terms of affordability for buyers, a tight home supply, and a potential easing of policy measures, it said.
Meanwhile, Hong Kong’s property boom is spreading to public housing.
A 126 sq ft apartment at the Fung Tak Estate in Hong Kong’s Kowloon district sold for HK$1.95 million (RM1.07 million) early last month, a record for a publichousing unit, said Full Mark Property Agency.
The HK$15,476 per sq ft price even topped some private flats in the district — an apartment at Lions Rise, a private development a 15-minute walk from Fung Tak, recently sold for US$14,638 (RM62,848) per sq ft, Centaline Property Agency figures show.
Public-housing flats aren’t the only properties breaking records in Hong Kong’s gravity-defying market. A car park in Central sold for US$3 billion (RM12.8 billion) in May, a waterfront residential site fetched US$2.2 billion in February and the city’s gauge of home prices reached a record high earlier this month.
Property agents say buyers for small public-housing units are mostly investors, as the rental yield can reach four per cent or more. The average rental yield for small units is 2.8 per cent, according to the Rating and Valuation Department. Bloomberg
The consensus is that Hong Kong’s housing prices may have more downside risk than upside.
JOYCE KWOCK
Nomura Holdings analyst