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Credit Suisse : Hong Kong's secondary transaction volume continues to roar to 3-years high

HONG KONG: According to the Hong Kong Economic Times (HKET), on Monday, Oct 25, the weekend transaction volume for the 10 major secondary residential estates, for the last weekend (Oct 23-24), has gone up to 94 transactions (from 84 transactions during Oct 16 - 17).

This implies the 3-year-high since November 2007. The volume has gone up for the 3rd week consecutively.

We estimate that by the end of October, our 2H10 secondary market transaction volume target (47,210 units / HK$171bn or RM68 billion) would be 90% achieved, while that our 2H10 volume target for the primary market (7,292 units / HK$57bn) would be 65% achieved - which implies upside risks to our volume forecasts.

In the primary market, the market is anticipating the launch of Festival City Phase 2 (1,369 units), by Cheung Kong, in early November. We expect the ASP would be similar to Phase 1 Festival City (approx HK$9,000 / sq ft). We expect that the market would response well to the project upon its launch, and enable Cheung Kong to sell the project as fast as Oceannaire (recall that Oceannaire was sold out as soon as the units were launched, and the project was cleared within 4 days).

The market performs in line with our expectation. From now till year-end, we expect the overall (primary + secondary) transaction volume continue to roar, which benefits volume players including Cheung Kong and Midland. Taking valuation into account, our top picks remains Sino Land, Midland, and Cheung Kong.

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