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2026-08-13 11:52:40 With developers' dividend yield spreads above historical averages, the market has yet to fully price in four key risks facing Hong Kong's property market, namely the absence of a job recovery, Greater Bay Area integration, Northern Metropolis supply, and a population gap, UBS Investment Bank Research said. Mark Leung, Head of Greater China Real Estate Research, UBS Investment Bank, noted that although GDP growth has reached 3-4% since 2024, new job creation has weakened evidently. Since 2023, employment opportunities for fresh graduates have plunged by more than 70%, while youth unemployment has remained at a high level of 7-8%. Improved cross-border transportation and lower income visibility may accelerate cross-border migration in pursuit of lower living costs, particularly against the backdrop of an aging population. The researcher estimated that the short-term housing supply shortage will last only four years, far shorter than the previous 12-year upcycle. From 2023 to 2025, net population inflow averaged only 32,000 people per year, far below the annual 153,000 people required to achieve the government's 2042 urban planning target of a population of 9.6 million. UBS expected the luxury residential segment to ride on AI-driven wealth creation. In contrast, the researcher remained cautious on the mass residential market, downgrading HENDERSON LAND (00012.HK) to Sell and maintaining a Neutral rating on SHK PPT (00016.HK). It also adjusted earnings forecasts to reflect the latest completion schedules and applied a higher NAV discount to mass residential developers to reflect the relatively shorter upcycle and future uncertainties. UBS expected Hong Kong residential property prices to remain broadly flat from 2H26 to 2027, compared with consensus forecasts for a 5-6% elevation in 2027. The researcher forecast residential rents to continue recording mid- to high-single-digit growth in 2026-27 in wake of tight near-term supply. However, rental growth may slow radically from 2028 onward. For the office sector, potential job losses triggered by AI may offset the benefits brought by lower supply inventory. The researcher estimated office vacancy rates to remain in the low teens, at around 10-13%, supporting only 2% CAGR in rents from 2025 to 2030. ~ AASTOCKS Financial News Website: www.aastocks.com | |