Hong Kong developers apparently prioritizing volume over margins

Despite improved homebuyer sentiment.

It has been noted that it is interesting that despite the improved homebuyer sentiment, developers appear to be continuing to prioritize volume over margins.

According to a research note from Barclays, it believes that their volume-based strategies are ultimately driven by the government’s increased land supply policy.

The report said that with a steady release of new sites, developers no longer have to ration their inventories since they can always replenish their landbanks at ever lower land prices.

Barclays also said that the Hong Kong property stocks having rallied by 6.5% in the past quarter vs. the Hang Seng Index’s 4.7% gain.

It said that it believes this already reflected the recent demand pickup.

At these levels, Barclays said that it does not view the Hong Kong property stocks’ risk-reward profile as attractive and would advocate a defensive stance.

Cheung Kong and Hang Lung Properties are our only two OW-rated stocks in the sector, it noted.