Hong Kong Property:Weekend property pusher,Policy likely to address economic growth,not property

A key highlight this week should be the Policy Address on Wednesday (13January). We expect austerity measures to remain intact with a neutral stancein the coming 12 months, versus mortgage tightening last year. We view thekey focus of this address to be stimulation of the HK economy instead ofhousing policy. One of the key economic growth pillars, HK retail sales, fell7.8% YoY in November. Chinese visitor arrivals also fell by a sharp 15.5% inNovember. According to the HKTDC, the government’s GDP growth forecastfor 2015 is 2.4% (9M15A: 2.5%), versus 2.5% in 2014 and 3.1% in 2013. Theunemployment rate is projected to have stayed low at 3.3%.

Weekend primary sales continued to trend lower to 17 units given theabsence of new launches, versus 30 the previous weekend. Key projectcontributor was Henderson Land’s Zutten (5 units). Secondary weekendsales at 10 key housing estates improved from a low base to 11 units, upfrom 8 the previous weekend. Property prices fell 0.04% WoW, versus -0.71%WoW the previous week, and are down 0.8% YTD. Since Sep 2015,property prices have corrected by 7.5%.

A key focus in January will be sales of the subsequent batch of SHKP’s ParkVista project. The company recently applied for a conversion of its adjacentindustrial site to an integrated commercial project (including retail) with a totalGFA of 812k sqft. If successful, it could change the overall landscape forYuen Long. However, the plan is yet to receive approval. Overall, we weredisappointed by weak sales at its Phase IA, which sold 176 units (49% of 362units in total) since early December, fetching HK$1.0bn. We expect SHKP tolaunch Phase 1B (499 units) and 1C (166 units) soon. To speed up the paceof sales, it may need to introduce price and sales incentives.