Sun Hung Kai to Sell 3,500 Hong Kong Homes as China Eases Credit Controls

Sun Hung Kai Properties Ltd., Hong Kong’s biggest developer by market value, plans to sell 3,500 homes this year in the city, seeking to benefit from a rebound in transactions over the past month.

The company plans to sell those apartments for HK$32 billion ($4.1 billion), Victor Lui, an executive director at the company’s agency arm, told reporters yesterday after Sun Hung Kai (16) posted a 13 percent gain in underlying profit for the six months ended December.

Hong Kong’s used home transactions have risen at least 7 percent in February from a three year-low a month earlier, according to Midland Holdings Ltd., the city’s biggest publicly traded realtor. The city’s home prices have fallen about 5 percent since June because of rising borrowing costs, extra transaction taxes and higher down-payment requirements.

“We’re still cautious,” Deutsche Bank AG’s Hong Kong- based analysts Jason Ching and Tony Tsang wrote in a report yesterday. “The recent improvement in market conditions is a rebound driven by the release of pent-up demand as a result of mortgage rate cuts.”

U.S. Federal Reserve officials said Jan. 25 benchmark interest rates would probably remain below 1 percent through 2014. Interest rates in Hong Kong usually follow those set by the Fed as the city’s currency is pegged to the U.S. dollar.

The property market may be staging a rebound with sales increasing in February, analysts at Nomura Holdings Inc. and Bocom International said this month.

Not Slowing Down

Sun Hung Kai’s shares fell 0.8 percent to HK$119.40 at the close in Hong Kong, paring its gain this year to 23 percent. The Hang Seng Property Index (HSP) advanced 24 percent

“We will continue to sell our projects according to the construction progress, regardless of the fluctuation in prices,” said Eric Chow, another executive director at Sun Hung Kai’s agency arm. “We’re not slowing down.”

Sun Hung Kai sold 3,037 homes in Hong Kong for HK$38 billion in 2011, according to data compiled by Centaline Property Agency Ltd.

The group will this year begin selling homes in northern areas including Yuen Long, Tuen Mun and Ma Wan, Lui said. The company also plans to accelerate sales of some investment assets.

Developers including Cheung Kong (Holdings) Ltd. (1) and Henderson Land Development Co. may sell as many as 17,000 homes in the city this year, about 60 percent more than in 2011, Barclays Capital Research analyst Andrew Lawrence wrote in a Feb. 23 report.

Property prices may fall as much as 25 percent by 2013, estimates Lawrence, who predicted the initial slide in April.

Residential Profit Gains

Sun Hung Kai’s profit from Hong Kong home sales rose to HK$7.68 billion for the six months under review from HK$5.94 billion a year earlier, after the developer booked profit from projects including the Imperial Cullinan and The Wings, it said.

Earnings were also boosted by growth in office and retail rentals in the city, which benefited from the continued influx of shoppers from other parts of China. Earnings from investment properties, which include the International Finance Centre in Hong Kong’s Central business district, and the International Commerce Centre, advanced 14 percent to HK$5.28 billion.

For the group, profit excluding property revaluation gains or losses climbed to HK$11.8 billion, or HK$4.58 a share, from HK$10.4 billion, or HK$4.05 a share, a year earlier. That’s higher than the HK$11.1 billion median estimate of three analysts surveyed by Bloomberg.

More Land

Sun Hung Kai added 4.9 million square feet of developable land space in the city, bringing its total reserve to 46.7 million square feet at the end of 2011, the company said. For other parts of China, the group has land reserves of 85.3 million square feet.

Hong Kong home prices have risen more than 70 percent between early 2009 and June last year, and have since dropped about 5 percent, according to Centaline Property Agency Ltd.

Sun Hung Kai is controlled by the family of co-chairmen Thomas and Raymond Kwok, whose combined wealth of $15.4 billion is third on Forbes magazine’s list of Hong Kong’s richest published in January.

To contact the reporters on this story: Kelvin Wong in Hong Kong at kwong40@bloomberg.net

To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net

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