[I-bank focus]HK property market's golden period fading away

    Jefferies Research believes Golden Week has not lent a short-term boost to the property market with retail sales and hotel room rates registering a clear decline compared to the preceding period.
  Retail weakness during Golden Week may suggest a further sign of a worsening operating environment for the landlords. Key landlords such as Wharf (00004) and Hysan (00014) will remain subdued since downside risks rise, impacting mall rental and revaluation.
  The research house expects price pressure to intensify as a result of ample primary supply. The secondary market continued to be influenced by new launches. With more than 8,600 new residential units available in 4Q (similar to total units sold in 1H), it inevitably hurts home prices given most new launches situated in New Territories.
  Rental decline implies less incentive to hold property for yield as CPI trended down from 3.2% to 2.6% in the last twelve months. With over 8,000 unit completion in 2H15 and 50% in a suburban area, Jefferies expects rising leasing supply will drive larger rental pressure, so is the housing value. This may appeal to potential buyers to switch to renting due to an uncertain market outlook.
  Since Jefferies expects home prices to normalize at least 30% below the current level, consensus NAV and earnings estimates will likely be adjusted over time to reflect the mid-cycle valuation. While the current sales performance is uncertain to be sustained, the research house prefers developers with higher NAV expansion potential such as CK Property (01113) and Henderson Land (00012).