CICC International: Hong Kong residential building prices are expected to rise by over 10%, with a chance of returning to previous highs within 2-3 years.

CICC released a research report stating that the Hong Kong property market is recovering, and investors should seek Alpha in differentiation. The bank expects that the volume of first-hand residential transactions will challenge a new high in 2013, with residential prices expected to rise by over 10% for the whole year. There is a chance that prices will return to their previous peak within 2-3 years. The rent for core office areas is expected to rise by 5-15% this year, while non-core areas will remain stable. Meanwhile, the recent significant improvement in the retail market is expected to drive positive renewal rents for retail properties in the next two years. The bank maintains its leading rating for the Hong Kong property industry, expecting profit margin expansion to drive upward revisions in profit forecasts. There is room for further valuation increase in the sector, and the bank is positive on the leading local property developer, New World Development, maintaining a buy rating.