Hong Kong Property:Time to get bullish?

Event

    Centaline Research Associate Director Wong Leung Sing expressed apositive tone on the HK property market at a lunch hosted by Macquarie,projecting prices to rise another 20% in the next 12-18 months (YTD +1.0%).

    Mr Wong thinks the growth momentum has been kicked started in 1Q17 andbelieves it will be inflation-led property price growth. Upcoming rate hikes inthe US will lead to global capital allocation flowing to both the US and HK,given the pegged USD/HKD exchange rate. He also shared three key viewson affordability, policy and source of demand.

    Impact

    Centaline view of the HK property market. Mr Wong expects 1) propertyprices to rise another 20% in the coming 12-18 months; 2) primary sales tostay robust and further increase from HK$185bn in 2016 to ~HK$200bn in2017E; 3) secondary transaction volume to stay low at around ~3k level.

    Centaline view on US interest rate hikes. His house view is that US interestrate hikes will not stop property price rises. The core rationale of rate hikes isattributed to US economic strength and higher inflation. HK will benefit fromfund inflows given its exchange rate is pegged to the USD. This should alsobenefit Hong Kong’s economic growth. We are more conservative on this lastpart of the argument.

    Takeaway 1