Hong Kong's measures to rein in its runaway property sector appear to be more of a “flag-waving” move, and could present opportunities for equity investors, said Andrew Sullivan, director, institutional sales trading at OSK Securities on CNBC, adding that demand for real estate in the city would remain robust.
“Long-term users are still going to be purchasing property,” he said. “People in Hong Kong are still getting married, they still want to move away from their parents, they still want to buy property.”
The steps announced earlier this week include additional stamp duties on properties sold within two years of their purchase and raising the down payments on homes more than $1.5 million from 40 percent to 50 percent.
Sullivan pointed out that while property developers may “hold some of their launches back to allow the demand to grow,” they still plan to proceed with their launches at the same prices.
Limited Downside to Property Selloff
Sullivan also highlighted the recent sell-off in Hong Kong property stocks is a good buying opportunity for investors.
Cheung Kong, Sun Hung Kai and Sino Land have lost about 2.9 to 3.7 percent since the announcement of the measures.
“My sense here is that once people get the taste of these measures they are going to basically say ‘look its not going to have a big impact here’ and I think you'll see the stocks bottom out," said Peter Churchouse, chairman at Portwood Capital, in a separate CNBC interview.
With valuations falling, Churchouse recommended investors rotate out of the smaller property players and get back into bigger, blue chip names.
“A lot of the big blue chip property stocks in this part of the world are still trading at 20 to 30 percent discount to the underlying asset value,” he said.
Hot Stock to Watch
Sullivan is bullish on property agency Midland Realty, in spite of the stock’s 15 percent plunge on Monday.
As developers proceed with their property launches, agencies like Midland will be earning commissions again, Sullivan said. He added that the company also operates on an efficient cost structure as most of its agents get paid based on commissions. "If they aren't selling properties, it’s not costing them a lot,” he elaborated.