Citi expects that Hong Kong property developers will have greater potential for earnings per share growth in the next two years, recommending New World Development and SINO LAND, among others

Citi published a research report indicating that investors have overlooked the lackluster performance of the Hong Kong real estate market last year, shifting their focus to the potential for rising property prices, profit margins, and sales in 2026 and 2027; accelerating investments to enhance net asset value; and the polarized rental outlook for retail properties (luxury goods showing positive growth) and Central District office buildings (negative impact lessening) compared to surrounding areas' retail/office spaces (still experiencing negative growth).

Citi believes that compared to rental stocks, developers exhibit greater upside potential for earnings per share from 2026 to 2027, primarily benefiting from improved property prices leading to enhanced housing sales profit margins and potential value-added new land acquisitions. Recommended stocks include SHK PPT (00016.HK), SINO LAND (00083.HK), Henderson Land Development (00012.HK) (after March), and Hang Lung Properties (00101.HK). Details on ratings and target prices can be found in another table.

Regarding dividends, Citi stated that Swire Properties (01972.HK) and Hongkong Land are committed to achieving mid-single-digit annual growth, while the growth in dividends per share for Wharf Real Estate Investment (01997.HK) is mainly due to savings from stable interest costs at a 65% payout ratio. Dividends for SHK PPT, Cheung Kong Holdings (01113.HK), SINO LAND, Kerry Properties (00683.HK), Hang Lung Properties, Hysan Development (00014.HK), and Wharf Holdings (00004.HK) are expected to remain stable. The dividend for Henderson Land Development, celebrating its fiftieth anniversary, is under dispute. LINK REIT (00823.HK), Prosperity REIT (00778.HK), and Champion REIT (02778.HK) are expected to see a decrease in distributions per fund unit due to negative rental growth. New World Development (00017.HK) has no dividends.

In terms of earnings, Citi expects Hongkong Land, Wharf Real Estate Investment, and Prosperity REIT to record growth; SHK PPT, SINO LAND, Cheung Kong Holdings, and Hysan Development to remain generally stable; Hang Lung Properties and Swire Properties to decline by 0% to 5% year-on-year, but improve in the second half of 2025 due to rental improvements in retail turnover; Kerry Properties (declining 15-20%, in line with expectations), Henderson Land Development (declining 40%, due to lack of sales revenue, etc.), Champion REIT (declining 10%), and LINK REIT showing weak performance; New World Development recorded a loss