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Thursday, 6 November 2008
Home prices forecast to fall sharply in 2 years
The slumping economy and the credit crunch have prompted Morgan Stanley to further lower its forecast for Hong Kong residential property prices, and it now expects them to fall 20 per cent over the next 12 months.
The slumping economy and the credit crunch have prompted Morgan Stanley to further lower its forecast for Hong Kong residential property prices, and it now expects them to fall 20 per cent over the next 12 months.
The US investment had earlier forecast a drop of 10 per cent.
Morgan Stanley said home prices would decline a further 10 per cent over the subsequent 12 months.
It also cut its earnings forecast for major developers by an average of 10 per cent for next year and an average of 12 per cent in 2010.
Morgan Stanley’s revised forecast reflects its more bearish economic outlook for the city in the face of a slowdown in consumption, investment and the service sector.
It predicts Hong Kong’s gross domestic product will grow 2.8 per cent this year, down from an earlier forecast of 4 per cent, and expects economic growth of 0.5 per cent for next year, compared with 3.3 per cent previously.
“We do not expect a meaningful recovery in the physical residential sector in Hong Kong until 2011,” wrote Derek Kwong, a property analyst at Morgan Stanley.
The report said the luxury residential sector would be hardest hit, with a 40 per cent drop for projects selling for an average price of more than HK$10,000 per square foot.
“This will put downward pressure on the development margins of the developers,” the report said.
Morgan Stanley cut the earnings forecast for Sun Hung Kai Properties next year by 4 per cent to HK$12.49 billion and cut Hang Lung Properties’ earnings forecast 26 per cent to HK$3.77 billion.
It said banks’ tighter credit policies were also hurting the property sector.
Last week, HSBC Holdings adjusted its criteria for mortgage home lending, lowering the loan-to-value ratio to less than 70 per cent for self-use property valued at more than HK$40 million and investment property which cost more than HK$20 million.
“This is one of the reasons behind our view that luxury residential average selling prices should be more vulnerable than mass, in addition to buyers of luxury units being more affected by the depleted wealth effect from the stock market and increased job uncertainty in the financial sector,” said Morgan Stanley.
Hong Kong Properties executive director Richard Lee Chi-shing said the number of registered transactions for properties worth HK$10 million or more dropped 16 per cent to 104 last month.
Some luxury residential projects recorded zero transactions for several months, Mr Lee said.
No transactions had taken place in Dynasty Court in the Mid-Levels in the past three months, and no properties in Redhill Peninsula had changed hands since September.
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Home prices forecast to fall sharply in 2 years
Sandy Li
6 November 2008
The slumping economy and the credit crunch have prompted Morgan Stanley to further lower its forecast for Hong Kong residential property prices, and it now expects them to fall 20 per cent over the next 12 months.
The US investment had earlier forecast a drop of 10 per cent.
Morgan Stanley said home prices would decline a further 10 per cent over the subsequent 12 months.
It also cut its earnings forecast for major developers by an average of 10 per cent for next year and an average of 12 per cent in 2010.
Morgan Stanley’s revised forecast reflects its more bearish economic outlook for the city in the face of a slowdown in consumption, investment and the service sector.
It predicts Hong Kong’s gross domestic product will grow 2.8 per cent this year, down from an earlier forecast of 4 per cent, and expects economic growth of 0.5 per cent for next year, compared with 3.3 per cent previously.
“We do not expect a meaningful recovery in the physical residential sector in Hong Kong until 2011,” wrote Derek Kwong, a property analyst at Morgan Stanley.
The report said the luxury residential sector would be hardest hit, with a 40 per cent drop for projects selling for an average price of more than HK$10,000 per square foot.
“This will put downward pressure on the development margins of the developers,” the report said.
Morgan Stanley cut the earnings forecast for Sun Hung Kai Properties next year by 4 per cent to HK$12.49 billion and cut Hang Lung Properties’ earnings forecast 26 per cent to HK$3.77 billion.
It said banks’ tighter credit policies were also hurting the property sector.
Last week, HSBC Holdings adjusted its criteria for mortgage home lending, lowering the loan-to-value ratio to less than 70 per cent for self-use property valued at more than HK$40 million and investment property which cost more than HK$20 million.
“This is one of the reasons behind our view that luxury residential average selling prices should be more vulnerable than mass, in addition to buyers of luxury units being more affected by the depleted wealth effect from the stock market and increased job uncertainty in the financial sector,” said Morgan Stanley.
Hong Kong Properties executive director Richard Lee Chi-shing said the number of registered transactions for properties worth HK$10 million or more dropped 16 per cent to 104 last month.
Some luxury residential projects recorded zero transactions for several months, Mr Lee said.
No transactions had taken place in Dynasty Court in the Mid-Levels in the past three months, and no properties in Redhill Peninsula had changed hands since September.
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