BOCOM INTL: Hong Kong residential property prices may rise by more than 10%, with a chance of returning to previous high levels within 2-3 years.

BOCOM INTL released a research report stating that the recovery of Hong Kong real estate has arrived, seeking alpha in differentiation. The bank expects that the transaction volume of first-hand residential properties may challenge a new high in 2013, and predicts that residential property prices may rise by more than 10% for the whole year, with a chance to return to previous highs within 2-3 years. It is expected that rental prices in core office areas (Central/Wan Chai/Tsim Sha Tsui) will increase by 5-15% this year, while non-core areas will also remain stable. At the same time, the recent significant improvement in the retail market can drive positive rental renewal rates for retail properties in the next two years. The bank maintains its leading rating for the Hong Kong real estate industry, expecting profit margin expansion to drive upward revision of profit forecasts and seeing potential for further valuation increase in the sector. The bank is bullish on the leading local property developer SHK PPT (00016), maintaining a buy rating. As for mainland real estate, BOCOM INTL stated that the industry continues to stabilize under continuous policy tightening. Looking ahead to the second half of the year, the decline in new home sales is gradually narrowing, bringing hope with a turning point in inventory; at the same time, some first-tier and key cities are seeing a turning point in prices, with second-hand property prices possibly bottoming out. The bank is optimistic about leading developers with relatively low valuation and land reserves in first and second-tier cities, including CHINA RES LAND (01109/buy) and YUEXIU PROPERTY (00123/buy).