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

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.

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

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