UBS has issued a research report indicating that the Hong Kong property sector has started 2026 on a strong note, with several stocks approaching historical highs. As valuations appear increasingly expensive, even for some stocks on a price-to-book basis, the firm is adopting a more selective approach. UBS particularly favors stocks with relatively low net debt-to-equity ratios, such as SINO LAND (00083), CK ASSET (01113), and KERRY PPT (00683), citing lower risks related to equity issuance due to the sector's slow progress in deleveraging and continued need for capital to replenish land reserves. The firm also prefers stocks offering sustainable high dividends, including SWIRE PROPERTIES (01972), SINO LAND, and KERRY PPT. Additionally, stocks with low price-to-book ratios supported by capital recycling or share buyback programs, such as CK ASSET and LINK REIT (00823), may have opportunities for valuation re-rating. UBS believes the market has largely priced in positive factors for residential recovery, including further interest rate cuts, an influx of mainland talent and students, and reduced supply. However, the potential benefits from returning emigrants have not been fully recognized, supporting the firm's forecast of over 10% growth in property prices over the next two years. Between 2020 and 2025, approximately 321,000 Hong Kong residents applied for UK BNO visas, Taiwan residency, or Canada's Stream A student visas. With the UK tightening language and income requirements for permanent residency, UBS expects a wave of returnees this year. Assuming 30% of the 2021 emigrant group returns, estimated additional demand by 2027 would be 13,900 units, equivalent to 90% of primary supply and 26% of total supply. The firm anticipates that supply-demand conditions will remain favorable until 2032, before the completion of the Northern Metropolis project. UBS expresses a preference for SWIRE PROPERTIES, SINO LAND, LINK REIT, CK ASSET, and KERRY PPT in 2026, while maintaining a cautious stance on HENDERSON LAND (00012) (prior to earnings announcement), Hysan Development (00014), and MTR Corporation (00066).