Housing and Land Measures Unchanged, Now Lower in Priority, Further Land Resumption Risk Receding

The Hong Kong Government’s 2020 policy address shifted focus from providing housing and land supply to more pressing issues, including strengthening political cohesion, managing the coronavirus pandemic and seeking new economic drivers. Housing- and land-related measures were unchanged from a year ago, with a primary goal of providing 316,000 public housing units in the coming 10 years. The government had identified the land needed for this purpose. Hence, the risk of further farmland resumption has receded at this point. Slower construction activities due to the pandemic should translate into lower labor and construction costs for real estate development projects. We maintain our moat ratings and fair value estimates for major Hong Kong developers, including Sun Hung Kai Properties, Henderson Land Development and CK Asset Holdings. Shares of major developers have underperformed the Hang Seng Index in recent months and are currently undervalued. With residential property prices holding steady, supported by record low interest rates, we favor Sun Hung Kai Properties for its robust development property pipeline.