Analysts warn against disconnect between Hong Kong's physical property, stock prices

Property index has been spiraling down.

The Rating and Valuation Department has released property statistics for July 2015 that show home prices up 0.8% m/m and rents up 0.5% m/m.

According to a research note from Barclays, this takes the housing price and rent increases for the first seven months of 2015 to 9.1% and 4.9%, respectively.

While the physical data has remained resilient, with the Hang Seng Properties Index correcting 2.6% w/w and now down 7.3% ytd, there again appears to be a disconnect between physical property and property stock prices.

Here's more from Barclays:

The CCL home price index recorded a 0.91% w/w gain, marking the third consecutive weekly increase. At a reading of 146.78, the CCL home price index is up 10.82% in 2015 to date and has set another record high. All sub-indices went up with the exception of Kowloon.

The CCL (small/medium) index gained 0.98% w/w, outperforming the CCL (large) index’s 0.56% w/w increase. Split by district, New Territories West, Hong Kong Island and New Territories East gained by 2.09%, 1.54% and 1.10%, respectively. Kowloon was the only district that recorded a home price drop, falling 0.25% w/w.

The Rating and Valuation Department has released the property review monthly supplement for July figures. Home prices rose 0.8% m/m and residential rents increased 0.5% m/m. The former is up 9.1% for the first seven months of 2015 and the latter is up 4.9%. Split by unit size, home prices of class A, B, C, D and E units (unit size in ascending orders) increased 10.1%, 9.4%, 7.5%, 5.9% and 5.7%, respectively, in 7M15.

Hong Kong property stocks recorded an average decline of 2.8% w/w, outperforming both the Hang Seng Index (-3.6%) and Chinese developers (-4.7%). Four of the top five weekly performers were Chinese developers, with Cheung Kong Property’s 2.6% w/w gain making it the third best weekly performer.

The best weekly performer was SRE Group with a 25.4% gain and at the other end of the spectrum, Greentown China’s 17.3% w/w decline made it the week’s worst performer. For the year-to-date, Hong Kong property stocks are down 15.3%, underperforming the Hang Seng Index (-11.7%) and their Chinese peers (-6.7%).