CITIC Lyon: Hong Kong property prices are expected to continue to fall 5%, and the property market will stabilize in the second half of next year

The Zhitong Finance App learned that CITIC Lyon published a research report saying that Hong Kong property prices are expected to drop another 5% and then bottom out in the second half of next year. At that time, mortgage interest rates should drop sharply to close to the level of return on net rent. Furthermore, CITIC Lyon expects next year to be a stable year for the property markets in mainland China and Hong Kong, China. It believes that buying out property inventories in the first half of next year and cutting US interest rates will be the key to driving the trend in the property market. Property prices in the two places are expected to continue falling in the first half of next year, but will begin to stabilize in the second half of next year.

Due to the direction of the Chinese government's stimulus policy, there is a high degree of certainty compared to US interest rate uncertainty, so CITIC Lyon is optimistic about the domestic housing market, while the Hong Kong real estate market is cautious. Meanwhile, the domestic housing market share of state-owned enterprises has been increasing during the downturn. I believe the situation will continue next year.

CITIC Lyon continues to rank China Resources Land (01109) as the preferred stock, based on undervaluation and stable fundamentals; it gave SHKP (00016) a “lower than market” rating, based on uncertain interest rate prospects and overvaluation. The bank also lowered the target prices for SHKP and Vanke (02202) Shenzhen A and H shares, of which SHKP's target price fell 9.8%.

According to CITIC Lyon estimates, property sales and sales volume in mainland China will drop 6.9% and 2% respectively next year; however, the Ministry of Finance is expected to announce the details of the accelerated land and housing purchase policy around late December this year, which will be a key factor in stabilizing the market. Assuming an investment of 2 trillion yuan, inventory will drop to a healthy level.