HONG KONG • Hong Kong's property stocks are less expensive than Singapore's, although not cheap enough to account for the risk that the world's least affordable city could have a housing crash.
That is according to analysts and money managers from Nomura Holdings to Janus Henderson Group. In Singapore, some are seeing signs of a market bottoming out after years of home price declines.
Hong Kong - where any let-up in government cooling measures looks unlikely in the short term - may be teetering on the edge of a slump, with Morgan Stanley among those seeing a risk of multiyear declines.
The upshot: while Hong Kong developers' shares are cheaper across a range of measures, their Singapore peers look more attractive.
"The consensus is that Hong Kong's housing prices may have more downside risk than upside," said Ms Joyce Kwock, an analyst at Nomura Holdings.
One valuation gauge shows that Hong Kong developers are trading at larger discounts to net asset value than peers in Singapore, with shares of Henderson Land Development at about a 54 per cent discount compared with City Developments' 20 per cent, according to Bloomberg calculations based on data from Nomura. A price-to-book comparison also shows Hong Kong property companies at lower valuations than their Singapore peers.
But the Singaporean market, especially the residential part, "looks like it's at the start of a multi-year upside cycle", said Ms Xin Yan Low, a property securities analyst at Janus Henderson Investors.
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33%
Singaporean real estate owners and developers have outperformed this year, gaining 33 per cent in their first rally after four years of declines, compared with a 24 per cent rise for their Hong Kong peers.
Singaporean real estate owners and developers have outperformed this year, gaining 33 per cent in their first rally after four years of declines, compared with a 24 per cent increase for their Hong Kong peers, based on Bloomberg Intelligence indexes.
Developer CapitaLand said that property investors see Singapore as more attractive than Hong Kong, London or cities in Australia.
Hong Kong home prices have shot ever higher, bouncing back from the global financial crisis and bouts of government cooling, while Singapore residential prices have declined 12 per cent from a peak.
A 70 per cent divergence in home prices in Singapore and Hong Kong over the past six years is due for a reversal, according to Morgan Stanley. Singapore developers score better in terms of affordability for buyers, a tight home supply and a potential easing of policy measures.
The bank's analysts forecast Singapore residential property prices to rise 5 per cent next year. In contrast, Hong Kong's multi-year price decline could start with a drop of 5 per cent this year.
BLOOMBERG
