Goldman Sachs: Raises this year's Hong Kong property price increase forecast to 12%, upgrading Hang Seng Properties(00012) and Sino Land(00083) ratings to "Buy"

Goldman Sachs has released a research report stating that the forecast for this year’s housing price increase has been raised from 5% to 12%, with the government’s visa and immigration policies expected to boost demand. Additionally, strong rental growth (approximately 20% increase from 2023 to 2025), coupled with declining mortgage rates, may encourage more people to “rent-to-own.” Since the removal of the stamp duty at the start of fiscal year 2024, transaction costs have significantly decreased, which could also stimulate investment demand. The bank expects future government policies to continue supporting population growth, income growth, and housing affordability.

Benefiting from active capital markets, the bank anticipates that this year, core office rents in Central will increase by 3% year-on-year, while other regions will remain roughly flat. However, the bank is more cautious about the retail market, expecting only a modest rent growth of 2%, due to ongoing competition from outbound travel and online shopping by Hong Kong residents.

In terms of stocks, the bank has upgraded Henderson Land Development (00012) and Sino Land (00083) from “Sell” to “Buy,” believing both are better positioned to benefit from the upward cycle in Hong Kong’s residential market, with target prices rising sharply to HKD 39 and HKD 14.6 respectively. The bank also reaffirmed its “Buy” rating for Sun Hung Kai Properties (00016), with a target price increased significantly to HKD 159. Both companies’ units account for about 36% of the overall market inventory, and new projects are underway. Additionally, the bank downgraded CK Asset Holdings (01113) from “Buy” to “Neutral,” citing its smaller exposure to the Hong Kong property market, with a target price raised to HKD 53.

On the other hand, the bank downgraded Wharf Real Estate Investment Company (01997) from “Buy” to “Sell,” and also lowered Link REIT (00823) from “Buy” to “Neutral,” due to their higher exposure to the retail sector and specific company-level or structural challenges; target prices are reduced to HKD 28 and HKD 41.3 respectively. Finally, the bank downgraded MTR Corporation (00066) from “Neutral” to “Sell,” with the target price increased to HKD 36.1.