Hong Kong property stocks have enjoyed a healthy run this year and according to analysts at Citi Research, the sector could benefit from further upside.
Home prices in the special administrative region's market are among the world's most expensive, with prices more than doubling since 2008 as buyers capitalized on low interest rates, and developers have been reaping the benefits.
Share prices of the city developers have surged in tandem; the industry's stocks are up 19 percent year-to-date on average and hovering at 18-month highs.
"We believe the sector is just at the midpoint of its re-rating run," said Ken Yeung and Oscar Choi, real estate analysts at Citi Research in a note published on Thursday, flagging Henderson Land, Sino Land, SHKP and CKH as their toppicks.
In the note, Yeung and Choi highlighted three main sweet spots set to spur property stocks higher this year.
Firstly, the Hong Kong government's fast-tracking of pre-sale consents by allowing developers to sell property before it's completed, should provide developers with a sales boost, they said. Also, the move by the government to accept lower land premiums, especially for larger sites for fewer bidders, is seen as beneficial for developers.
Finally, the Citi Research analysts said another encouraging factor was the reduced likelihood of further policy restrictions.
In recent years, Hong Kong authorities have rolled out a series of curbs to cool frothy housing prices. In 2012, for example, three new property taxes were rolled out in quick succession, including a 15 percent tax on foreign buyers which was meant to deter speculators from mainland China.