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Views on the Estate: HK/China property monitor - Market rumor on further policy easing for China property

Shared By Stock Fanatic on Thursday, November 19, 2015 | 19.11.15

  • Market rumor on further policy easing for China property: According to 21st Century Business Herald, government officials have expressed their intention to actively stabilize the housing market in China, and additional policy easing measures might be introduced in near term, such as lowering of first-home down payment from 25% to 20% in cities without home purchase restrictions, and the lowering of mortgage rate floor to 0.7x benchmark rate. Other potential measures include reduction in real estate-related taxes and easing on multiple home ownership. The policy focus on 2016 will be on the “monetization” of shantytown redevelopment, such as using monetary compensation in relocation process (Source: 21st Century Business Herald)

JPM View: While we think further policy easing is positive for the sector in sustaining the positive sentiment, the actual impact might not be huge. For down payment requirements, we have been expecting the ratio for first homes to go further down to 15%, which is the 2007 level, from the current 25%. For second homes, we expect that to be lowered from the current 40% to 30%. However, the marginal impact might be limited. Also, even if the mortgage rate floor is lowered, we do not expect the mortgage rate to go down much further. All in all, we expect the market to be broadly stable in 2016, with a mild 5% increase in sales volume.
  • Swire sold the last unit at Opus Hong Kong: The last unit on 12/F (top floor) was sold for HK$509.6 mn, or HK$93.6K psf yesterday. The unit provides a saleable area of 5,444 sf with a rooftop and 2 car parking spaces. All the 12 units at Opus Hong Kong have been sold, which generated some HK$5.1 bn sales proceeds. 8 out of the 12 units were sold this year.

On other primary launches, Kowloon Dev has priced the third batch of 50 units at South Coast with a post-discount ASP of HK$16,224-HK$21,256 psf, which is similar to the first and second batches. All the 150 units of the project will be launched the coming Saturday and the developer has received over 700 cheques so far. Wheelock priced the sixth batch of 51 units (16 are specialty units) of CAPRI at an average ASP of HK$13,888 psf after discount, ~2% premium to the initial batches. A total of 111 units will be launched at CAPRI this weekend. Kerry released the price list on an additional 110 units at Bloomsway, with an average ASP of HK$11,445 psf after discount that is similar to the previous batch. (Source: HKET)

JPM View: We believe the high-end luxury residential market is likely to be more resilient than the mass market in the expected slowdown in 2016. In order to drive satisfactory sell-through rate, we believe developers will continue to price their product competitively to the secondary market. Increasing second mortgage offering by the developers is starting to be the trend to attract prospective buyers. While the scale is not significant, we believe this is something equity investors will be closely monitoring with developers’ increasing credit risk exposure. (Read Report)

Source : JP Morgan Asia Pacific Equity Research

Posted on Thursday, November 19, 2015 | 19.11.15
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