JPMorgan Mainland China/Hong Kong Property: Leading Indicators Stable; Hong Kong Pricing More Aggressive, Sales Rates Diverge
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JPMorgan reports that leading indicators for mainland China property remain largely unchanged, while Hong Kong developers adopt more aggressive pricing strategies, leading to divergent new-launch sales rates. In mainland China, the Centaline tier-1 secondary price index held steady at 19.6, with manager confidence edging up to 58. However, primary sales registrations across 60 cities dropped 28% year-over-year, and secondary registrations across 12 cities were flat. Mainland property stocks fell 9% last week, underperforming the Hang Seng Index.
In Hong Kong, the price index gained 0.5% week-over-week, up 5% year-to-date. Secondary transactions across 35 major estates declined 10% week-over-week but rose 22% year-over-year. New project sales rates varied significantly due to aggressive pricing. Deep Water South Ph6A sold 65% of its first batch at HK$29,000/sq ft, while Cloudview sold 43% of its second batch at HK$13,800/sq ft. Both projects commanded premiums exceeding 13% over secondary markets, showing buyer price sensitivity.
On the credit front, the JACI China high-yield property index fell 6% last week. S&P revised Jinmao's outlook to negative, citing slow deleveraging and elevated debt/EBITDA ratios. Meanwhile, Vanke is reportedly considering a 10-year extension of its domestic bonds as part of a Shenzhen-led restructuring plan involving RMB 80 billion in new funding. JPMorgan favors China Overseas Land and Jinmao among mainland developers, Sun Hung Kai and Sino Land for Hong Kong developers, and Swire Properties and Hang Lung for retail landlords.