Hong Kong developers, seeking funds to tap an expanding government land supply, are this month preparing to sell the most homes in six years as expectations for prolonged low interest rates fuel demand.
Real estate companies led by New World Development Co., this year’s best performer in Hong Kong’s benchmark property gauge, may sell more than 3,300 units from eight new projects in October, according to Buggle Lau, chief analyst at Midland Holdings Ltd. (1200), the city’s biggest publicly traded realtor. That would be the highest monthly figure since August 2006, Lau said.
Hong Kong Chief Executive Leung Chun Ying, who took over in July, has expanded property curbs initiated by his predecessor, including boosting home supply and raising mortgage downpayment requirements, to rein in an asset bubble exacerbated by the U.S. Federal Reserve’s third round of quantitative easing. Home prices have surged almost 90 percent since early 2009 on a shortage of new supply and an influx of mainland Chinese buyers.
“We have a combination of a red-hot market and a government trying to make more units available to buyers quicker,” said Wong Leung-sing, an associate director of research at Centaline Property Agency Ltd., the city’s biggest closely held realtor. “Of course, developers are rushing in.”
The value of property transactions in the city rose 1 percent in September from a month earlier to HK$54.7 billion ($7.1 billion), the highest since May, Centaline said in an e- mailed statement today.
Property companies, the best performing sub-group in the benchmark Hang Seng Index (HSI) this year, may have sold as many as 7,000 homes in the last quarter, bringing the year’s total to more than 15,000 units for sales of HK$150 billion, Wong said. That compares with about 9,100 units for HK$108 billion in 2011, he said.
More than 2,500 units from The Reach, a joint project by New World and billionaire Lee Shau-kee’s Henderson Land Development Co., may go on sale this month, according to Midland. Cheung Kong Holdings Ltd. (1), the developer controlled by Li Ka-shing, Hong Kong’s richest man, will probably sell more than 300 units from two new projects, the realtor said.
Other builders with new developments going on sale include Sino Land Co., Wheelock & Co Ltd. (20) and China Overseas Land & Investment Ltd. (688), the Hong Kong-traded developing arm of the country’s construction ministry.
The Hang Seng Property Index (HSP), which tracks nine of the biggest developers in Hong Kong including Cheung Kong and New World, has risen 29 percent this year, compared with the 13 percent advance in the Hang Seng Index. The real estate gauge gained 0.6 percent today.
New World has led this year’s gain with 95 percent. The builder, which accounts for about 7 percent of the new homes sold in Hong Kong over the past year, is the only developer assigned a “buy” (17) rating from Nicole Wong, an analyst at CLSA Ltd. in Hong Kong.
“In a scenario of increasing land supply, developers with the smaller market shares can benefit because they have more chance to expand,” said CLSA’s Wong. “New World has a good project pipeline.”
New World may sell more than 3,300 units for as much as HK$22 billion by the end of next year, Chairman Henry Cheng said last month.
Cheung Kong, which targets selling more than 4,000 units for the whole year according to Executive Director Justin Chiu, has risen 25 percent this year, while Sino Land, which sold the most homes among developers, is up 30 percent. The two builders have market shares of about 30 percent and 13 percent respectively, Wong said.
Sun Hung Kai Properties Ltd. (16), whose co-chairmen are going on trial for bribery-related charges this month, has risen 16 percent this year, the worst performance in the property index.
The developer, Hong Kong’s biggest by market value, plans to begin offering homes in at least five projects in the next six to nine months as it targets sales of about HK$28 billion for the fiscal year ending June 2013, Deputy Managing Director Victor Lui said last month.
The government expects developers to supply 65,000 private units over the next three to four years and will make available 75,000 public housing units, Housing Secretary Anthony Cheung said in August. That compares with about 40,000 private units completed in the four years between 2008 and 2011 according to the Transport and Housing Bureau.
Hong Kong’s home prices have now surpassed their peak in October 1997, which marked the start of a 70 percent decline to August 2003, according to the Centaline index. They have soared 240 percent since that trough nine years ago.
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