Goldman Sachs: The average capitalization rate for commercial real estate in Hong Kong has risen to 5.7%. Maintaining a "buy" rating for Cheung Kong (Holdings) Limited (01113) and Sun Hung Kai Properties Limited (00016).

Goldman Sachs issued a report maintaining a "buy" rating for Cheung Kong Property (01113) and SHK PPT (00016), with target prices of 92 Hong Kong dollars and 41 Hong Kong dollars respectively. In addition, they maintained a "sell" rating for Henderson Land (00012) with a target price of 19.5 Hong Kong dollars. The report stated that the retail and office rental index in Hong Kong have both decreased by 4% and 5% respectively since the beginning of the year, with the price index showing a double-digit decline as of the end of October. According to Goldman Sachs' estimates, following this trend, the capitalization rates for retail and office buildings in Hong Kong have increased by around 0.4 and 0.8 percentage points compared to 2023, reaching 6.7% and 4.7% respectively. This has led to the average capitalization rate for commercial real estate (CRE) in Hong Kong rising by 0.6 percentage points to 5.7%, which is 1 percentage point higher than the developers' average capped mortgage interest rate of 4.7%. Among Hong Kong developers, Henderson Land has shown a more aggressive stance in their capitalization rate forecasts for Hong Kong commercial real estate, while Cheung Kong Property and SHK PPT have taken a more conservative approach. If the industry-estimated 5.7% is taken as the benchmark for the maximum coverage rate, the value of investment property portfolios could fluctuate between a 4% increase and a 24% decrease, with the industry average impact being a 13% decline.