Sun Hung Kai Lowers Sales Target on Hong Kong Property Curbs

Sun Hung Kai Properties Ltd. (16), the world’s biggest developer by value, lowered its home sales target after the Hong Kong government’s extra property measures to curb prices that have doubled in four years.

The developer aims to release HK$32 billion ($4.13 billion) worth of units for sale in the year ending June, Deputy Managing Director Victor Lui told reporters at a briefing in Hong Kong yesterday. Lui said in September Sun Hung Kai had set a target of HK$35 billion for the period.

Hong Kong on Feb. 22 doubled stamp duty taxes on all properties over HK$2 million and raised down-payment requirements on some mortgages after home prices rose to a record last year, defying previous attempts to cool a market it said is at risk of an asset-price bubble. Sun Hung Kai, whose billionaire co-chairmen brothers were arrested for bribery in March, booked a lower profit from apartment sales in the six months ended December.

“Our sales will inevitably be affected by the measures,” Lui said. “But we have many projects this year so in general terms we will still be very busy.”

The developer yesterday said profit excluding changes in property revaluation fell 1.9 percent to HK$11.55 billion for the six months ended Dec. 31. That compares with the HK$10.5 billion median estimate of four analysts surveyed by Bloomberg News.

Sun Hung Kai’s shares fell 1.3 percent to HK$118.50 as of 9:41 a.m. Hong Kong time, while the nine-member Hang Seng Property Index (HSP) dropped 0.6 percent. They’ve risen 1.9 percent this year compared to a 3.3 percent advance in the property gauge.

Profit Falls

For the fiscal first half, profit from property sales fell to HK$6.4 billion from HK$7.9 billion a year earlier.

The case against Thomas and Raymond Kwok, sons of the company’s late co-founder, has delayed the sales of some of Sun Hung Kai’s projects, said Nicole Wong, an analyst at CLSA Asia- Pacific Markets.

The case “has affected new project launches for a few months,” said Wong. “But they have also only just come off a record high year in home sales. It’d be very hard to match that.”

Sun Hung Kai’s profit from home sales rose to a record in the fiscal year ended June last year, as the homebuilder known for its high-end developments accelerated the opening of projects including the Imperial Cullinan to take advantage of a surge in property prices.

Home Sales

Sun Hung Kai accounted for about 17 percent of all new home sales in Hong Kong last year, according to figures compiled by Centaline Property Agency Ltd., the city’s biggest closely held realtor. It sold more than 1,600 units for HK$22 billion in 2012, down from more than 3,000 units worth HK$38 billion in 2011, according to Centaline.

Hong Kong’s home prices have doubled in the past four years and have now surpassed the previous peak in 1997, on an influx of mainland Chinese buyers, record low interest rates and a lack of new units. That has prompted the government to impose measures including tightening mortgage lending, imposing higher transaction taxes and pledging to increase supply.

Home prices have risen 5 percent this year even after Hong Kong Chief Executive Leung Chun-ying, who took over in July, introduced the city’s first property tax aimed at foreign buyers in October.

Worst Performer

Sun Hung Kai’s shares gained 19 percent last year and were the worst performer in the Hang Seng Property Index. The shares have risen 8 percent since the Kwok brothers’ March 29 arrest, while the property-gauge gained 25 percent during the same period.

The Kwok brothers have a combined net worth of $17 billion, according to data compiled by Bloomberg News. The brothers and two other men are charged with conspiring to provide payments, loans and free use of apartments totaling more than HK$35 million to the city’s former No. 2 official Rafael Hui, according to court documents.

They were first arrested in March last year and will next appear in court on March 8. The brothers have denied any wrongdoing.

The developer has been run by Thomas and Raymond Kwok since the ouster as chairman in 2008 of their elder brother Walter.

To contact the reporter 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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