Overview of China and Hong Kong Property Markets
The property markets in China and Hong Kong experienced contrasting trends in 2024. While second-hand home transactions in Tier 1 cities of China surged, new home sales and land supplies saw a decline. Hong Kong, on the other hand, benefited from attractive pricing strategies that boosted its primary market performance. The year 2025 is expected to bring heightened focus on stabilizing the property sector, given rising geopolitical tensions. UOB Kay Hian maintains an OVERWEIGHT rating for the China property sector and MARKET WEIGHT for Hong Kong’s property market.
China Property Market: Key Trends and Insights
In December 2024, new home transactions in major cities showed a positive month-on-month (MoM) and year-on-year (YoY) growth. However, over the full year, the average daily sales volume of new homes in 15 major cities dropped by 13.0% YoY. Tier 1 cities demonstrated resilience with an 8.6% increase in daily sales, while Tier 2 and Tier 3 cities faced sharp declines of 26.9% and 22.0% YoY, respectively. Second-hand home transactions in Tier 1 cities posted robust growth, with cities like Shanghai and Shenzhen recording YoY increases of 36.8% and 57.1%, respectively. Despite this, listing prices for second-hand homes continued to decline due to the strategy of trading price for volume.
Land sales were another weak spot in 2024. Revenue and gross floor area (GFA) sold from all types of land in 300 cities dropped by 23.1% and 14.7% YoY, respectively. Residential land sales fell even more drastically, with revenue dropping 27.8% and GFA sold declining by 23.3% YoY.
Hong Kong Property Market: Highlights
The Hong Kong property market displayed mixed performance. The CCL Index fell 6.4% in 2024 to its lowest level in over eight years, reflecting continued declines in property prices despite a rebound in transaction volumes. First-hand private residential property transactions surged by 57.8% YoY in volume and 58.9% YoY in value, driven by low pricing strategies from developers. Second-hand transactions also rose by 13.8%, though transaction values dipped slightly by 3.5% YoY. Rental yields in Hong Kong reached 3.46% in October 2024, making it an attractive market relative to the mainland cities.
Detailed Company Analysis: Top Picks for 2025
1. China Overseas Land & Investment Ltd. (COLI)
Ticker: 688 HK
Recommendation: BUY
Share Price: HK\$12.32
Target Price: HK\$18.60
Upside Potential: 51.0%
COLI is the top pick for the China property sector. With a low price-to-earnings (PE) ratio of 7.0x for 2024F and 6.5x for 2025F, the company offers significant growth potential. Its price-to-book (P/B) ratio stands at an attractive 0.3x, and it provides consistent dividend yields of 5.3% and 5.5% for 2024F and 2025F, respectively.
2. Longfor Properties (Longfor)
Ticker: 960 HK
Recommendation: BUY
Share Price: HK\$9.91
Target Price: HK\$17.20
Upside Potential: 73.6%
Longfor Properties is another strong contender. The company boasts a PE ratio of 6.3x for 2024F and 6.1x for 2025F. Its P/B ratio is 0.4x, and dividend yields for both years stand at 4.7%. With a target price significantly higher than its current trading price, Longfor offers substantial upside potential.
3. Sun Hung Kai Properties (SHKP)
Ticker: 16 HK
Recommendation: BUY
Share Price: HK\$73.65
Target Price: HK\$103.00
Upside Potential: 39.9%
SHKP remains the top pick for the Hong Kong property market. It offers a PE ratio of 9.8x for 2024F and 9.4x for 2025F. The company’s P/B ratio is 0.3x, and it provides attractive dividend yields of 5.3% and 5.9% for 2024F and 2025F, respectively. Its strong rental yield and market positioning make it a solid investment choice for 2025.
4. China Resources Land Ltd.
Ticker: 1109 HK
Recommendation: BUY
Share Price: HK\$22.15
Target Price: HK\$32.40
Upside Potential: 46.3%
China Resources Land offers a balanced investment opportunity with a PE ratio of 6.6x for 2024F and 5.7x for 2025F. Its P/B ratio is 0.5x, and dividend yields are 6.2% and 7.0% for the respective years. These figures highlight the company’s strong fundamentals and value proposition.
5. New World Development
Ticker: 17 HK
Recommendation: HOLD
Share Price: HK\$4.93
Target Price: HK\$7.02
Upside Potential: 42.4%
New World Development presents a mixed picture. While its upside potential is notable, its PE ratio for 2024F is negative (-1.4x), which reflects the company’s current challenges. Its dividend yields for 2024F and 2025F are 3.5% and 4.6%, respectively, offering moderate returns for investors.
6. Sunac China Holdings Limited
Ticker: 1918 HK
Recommendation: SELL
Share Price: HK\$1.91
Target Price: HK\$1.06
Downside Potential: -44.5%
Sunac China Holdings faces significant challenges, with no meaningful PE ratio for 2024F and 2025F due to its financial struggles. The company provides no dividends, making it a less attractive option for investors. The recommendation to sell reflects its ongoing difficulties and lack of clear recovery prospects.
Final Thoughts
The outlook for China and Hong Kong’s property markets in 2025 remains cautiously optimistic, with stabilizing measures and geopolitical risks playing a pivotal role. For investors, companies like COLI, Longfor, and SHKP stand out as top picks, offering significant growth potential and robust fundamentals. While challenges persist, strategic investments in these markets could yield substantial returns in the coming year.
