{I-bank focus}2019 Policy Address benefits HK developers

    Morgan Stanley believes the latest policy address should help residential volume and thus developer stocks. Investors might prefer developers with more farmland. However, many of these initiatives will take years. The research house remains cautious about landlords.
  Morgan said LTV (loan-to-value) ratio for units below HK$8mn (previously HK$4mn) will be 90% while units below HK$10mn (previously HK$6mn) will be 80%. This is supportive of residential demand and hence property prices.
  Small to medium-sized units should benefit more than large/luxury units. The secondary market should see incremental demand growth since primary units were supported by developer loans before this new policy, Morgan said.
  Land Sharing Pilot Scheme (or the private-public-partnership model) to commence in 2020 is positive to farmland holders to unlock land value. Land Resumption Ordinance for 700 hectares of sites located in the planned New Development Areas is also positive to developers' cash flow.
  However, Morgan noted that some concerns remain: (1) Rezone private land for public housing and then use LRO to "resume" land; and (2) "resume" land that is zoned for high-density housing but for which no development plans have been submitted.