Property on pause? Experts say recovery for companies in the sector will be delayed

Moody's Investors Service sees a 4% decline in full-year earnings of 11 companies.

It seems like the worst is not over yet for property companies in Hong Kong, as experts expect recovery for the sector to be delayed into 2023.

According to Moody's Investors Service, the 11 companies that it rates will likely see their aggregate earnings before interest, taxes, depreciation, and amortization (EBITA) fall by 4% in fiscal 2022.

Rental income for retail and office is also expected to decline by 7% in fiscal 2022, and around 3% in the next 12-18 months, respectively.

The expected declines in rental income and earnings are on the back of retail concessions, lower renewals of retail and office rents, and lower development revenue, Moody’s said.

By 2023, however, Moody’s said earnings of these 11 companies will see a 5% growth, with retail and residential sectors in the lead.

Rental income for retail will also recover by 5%-10% in fiscal 2023 as social distancing restrictions ease, Moody’s added.

For the four developers it rates, Moody’s said it is seeing a 15% to 20% decline in their contract sales due to pandemic movement restrictions. The same degree of decline will also happen in primary residential sales value, added the analyst.