The tumble in Hong Kong’s home sales to a record low signals further declines in Midland (1200) Holdings Ltd., the city’s largest listed realtor, according to Bocom International Holdings Co.
The CHART OF THE DAY shows the three-month average of residential transactions in Hong Kong fell to 3,693 units in September, the lowest since at least 1996, according to government data compiled by Bloomberg. Sales have plunged even as Centaline Property Agency Ltd.’s housing-price gauge holds within 3.1 percent of a record high. The lower panel shows Midland had 9,576 employees at the end of June, according to the latest company statement, the most ever and triple the amount a decade ago, alongside the company’s stock price.
Shares of Midland, which arranges about 30 percent of all property sales in Hong Kong, slid 67 percent since April 2010. The company had a net loss of HK$95 million ($12 million) in the six months to June 30, the biggest since the second half of 2008, as operating expenses exceeded sales. The stock will continue to be under pressure unless the property market recovers, said Alfred Lau, an analyst at Bocom in Hong Kong.
“This year will likely be loss-making for the company and that would eat into cash flow and the company’s ability to pay dividends,” said Lau, who has a sell rating on the stock and a 12-month target price that’s 14 percent below yesterday’s close.
Residential sales have declined as government taxes and the prospect of rising interest rates deter buyers in the world’s most expensive property market. The number of real estate agents in Hong Kong surged 68 percent to 36,225 in September from January 2008 as home prices doubled, according to government data. The number of Midland employees in the city has fallen by “double digits” this year through September, Deputy Chairman Angela Wong said by phone.
Midland’s managers “have to cut jobs and they have to cut shops,” said Nicole Wong, a property analyst at CLSA Asia-Pacific Markets in Hong Kong. “There is no other way out.” Brokerages from UBS AG to Bank of America Corp. and Jefferies Group LLC predicted this month the city’s home values will fall at least 20 percent through next year.
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