Hong Kong-Singapore Builder Slump to Deepen: Chart of the Day

Property developers in Hong Kong and Singapore will extend the biggest declines among global peers as government curbs deter buyers in Asia’s most expensive housing markets, according to AMP Capital Investors.

The CHART OF THE DAY tracks Hong Kong’s Hang Seng Property Index, Singapore’s FTSE Strait Times Real Estate Index and the Standard & Poor’s 500 Real Estate Index. The two Asian gauges sank to their lowest levels in at least 17 months last week. Home prices have dropped 4.3 percent from their high in Hong Kong, according to Centaline Property Agency Ltd.’s index. They fell 0.9 percent in Singapore last quarter, official data shows.

The two cities have imposed extra taxes and raised minimum down payments to restrain a surge in home prices after mortgage rates followed those in the U.S and Europe to near-record lows. Neither city sets their own interest rates because of managed currencies and open economies. Developer shares from CapitaLand Ltd. to Sun Hung Kai Properties Ltd. have fallen on concern slumping housing sales will spur price cuts and dent earnings.

“Authorities in both cities seemed to be quite determined to fight a housing bubble,” said Nader Naeimi, the Sydney-based head of dynamic asset allocation at AMP Capital, which manages $131 billion. “I wouldn’t buy developers at this stage as governments’ housing policies are working against them.” Naeimi predicted further stock declines of as much as 15 percent and said he prefers U.S. and German real estate companies.

Home builders in Hong Kong sold the fewest residential units in almost two decades in 2013, and sales in Singapore dropped to a four-year low. U.S. new-home purchases jumped 16 percent in the period, the most in five years, while the S&P/Case-Shiller index of property prices in 20 American cities climbed 14 percent in November from a year earlier.

Singapore and Hong Kong developers account for eight of the 10 worst performers in the 101-company MSCI World Real Estate Index during the past 12 months. CapitaLand, Southeast Asia’s largest builder, has tumbled 25 percent while Sun Hung Kai, Hong Kong’s second biggest, lost 22 percent. Property prices in Hong Kong may drop as much as 20 percent this year, S&P said last month, while Barclays Plc predicted Singapore prices will fall as much as 15 percent.

The Hang Seng Property Index declined 0.6 percent at 2:41 p.m. in the city. The FTSE Strait Times Real Estate Index added

0.3 percent.

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