Hong Kong property prices could fall by a fifth in the first half of 2009, warns Credit Suisse.
The report said: ‘We were expecting property prices to fall by 41% from the peak in 2008. Given that prices have already fallen by 23%, we believe the remaining downside for the property market is about 20%.
‘With the sharp rebound in stocks since December, we believe it is not time to chase the entire sector now. There is still about 20% downside for the property market in 1H09.
‘Stock prices tend to lead the physical market by about four months and we believe the best time to revisit the whole sector will be toward the end of 1Q09.’
Credit Suisse added that the slowdown in domestic consumption and tourist industry is impacting the retail sector, while a continued rise in unemployment and the increasing negative wealth impact will ‘drive the last leg down for the property market’.
In relation to retail, Credit Suisse’s analysts said that: ‘We would not be surprised to see retail rents of mass and prime shopping malls fall by 20% and 15%, respectively, in 2009, although most major landlords are not feeling major downward pressure on rents yet.’
‘The “turnover rent” portion, though, will probably be eroded quickly. Our view on the slightly smaller fall in retail rent for prime shopping malls is based on: 1) the increasing polarisation between prime and non-prime shopping malls during a downturn and 2) the support from mainland tourist spending in Hong Kong.’
But the report did recommend a top five list of still-healthy Hong Kong property companies, namely: Cheung Kong Holdings, Sun Hung Kai Properties, MTR Corporation, Great Eagle, Swire Pacific and Wharf Holdings, which it said were ‘the more defensive names among both developers and investors.’