Land prices in China may drop further and it is still too early to buy land in the country, said Ronnie Chan, Chairman of Hang Lung Properties Ltd. (101), the Hong Kong developer investing at least $8.5 billion in Chinese real estate.
“Why hurry? It’s not like the market is going to take off anytime soon,” Chan said in an interview at the sideline of the Real Estate Investment World conference in Singapore today. “It’s still not the best time yet. We need to look more carefully.”
Cash-strapped Chinese developers have been reluctant to buy land after government curbs introduced since 2010 to prevent a property bubble tightened credit, draining liquidity. China’s home values fell in a record 54 of 70 cities tracked by the government in May as developers cut prices to boost sales amid housing curbs.
The company, already one of the most cashed-up Hong Kong builders, is “doing all the preparations work” for acquiring more projects in China, said Chan.
Hang Lung has restarted sales of its Hong Kong apartments this year and has sold commercial properties that it deemed to be “non-core” assets, Chan said. It raised $500 million this month through its first dollar-denominated debt sale since 1993.
Hang Lung will in the fourth quarter open a shopping mall in the northeastern Chinese city of Shenyang, its fifth outside of Hong Kong. That mall is fully let and may generate 50 percent higher return than the company’s other shopping center in the city, Chan said.
The company is also building projects in cities including Wuxi, Tianjin, and Dalian. Its most recent acquisition was in September for a site in the southwestern city of Kunming. It was the company’s first land purchase since May 2009.
Hang Lung’s cash ratio, a measure of liquidity for developers, was 2.66 at the end of 2011, the second-highest among the 50 biggest Hong Kong-listed builders tracked by Bloomberg.
Hang Lung’s shares have gained 17 percent this year, compared with the 6.2 percent advance in the Hang Seng Property Index.
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