Mainland builders closing in with striking land buys
As Hong Kong’s runaway property market and expectations of a stronger renminbi pushed more Hong Kong residents into buying homes on the Chinese mainland in the past two decades, there has been a reciprocal effect, with hot mainland money pouring into the city’s residential sector, which boasts a mature market that offers long-term protection for homes buyers.
Residential land in Hong Kong has become the darling of mainland groups which have embarked on an unprecedented shopping spree, snapping up almost every asset — ranging from life insurers to fast-food chains.
Mainland developers’ participation in the local property market has grown exponentially in the past 20 years. Back in the 1980s and 1990s, their involvement had been normally restricted to acquiring land jointly with Hong Kong build- ers. But now, with their business acumen and financial might, they’ve been making eye-catching bids and won at Hong Kong land sales on their own with record-shattering prices. In the latest show of strength, mainland property giants, including China Overseas Land & Investment Ltd, China Resources Land Ltd, China Vanke Co Ltd, and Yuexiu Property Group Co Ltd, are among 35 parties that have expressed interest in a site around the Kam Sheung Road MTR Station, Yuen Long, valued at HK$8.4 billion.
Mainland builders dropped a bombshell in the city’s property market earlier this year when Logan Property Holdings Co Ltd and KWG Property Holdings Ltd forked out HK$16.9 billion for a site on Ap Lei Chau, off southern Hong Kong Island.
Within one week, another residential plot at MTR Corp’s Wong Chuk Hang Station was acquired by the property unit of Shenzhen-based Ping An Insurance (Group) Co and Hong Kong property and roadtoll investment company Road King Infrastructure Ltd for an undisclosed sum. It was the first time a mainland insurer has bought land in the SAR.
Hainan-based business conglomerate HNA Group Co Ltd, led by tycoon Chen Feng, whose businesses range from tourism to investment bank- ing, has poured HK$27.2 billion into the local property sector so far, snapping four residential plots at Kai Tak within five months since late last year.
Their lust for Hong Kong property has built up on a slew of factors — skyrocketing land prices on the mainland, cutthroat competition in the mainland market, a depreciating renminbi, Hong Kong’s lower corporate tax rate, as well as better prospects of business diversification and brandbuilding.
According to Jones Lang LaSalle (JLL), the percentage of residential sites won by seven major Hong Kong developers — Sun Hung Kai Properties Ltd, Cheung Kong Property Holdings Ltd, Henderson Land Development Co Ltd, Nan Fung Group, New World Development Co Ltd, Sino Land Co Ltd and Wheelock Properties (Hong Kong) Ltd — at land auctions had shrunk from 45 percent in 2012 to 22 percent last year. From a supply perspective, these seven developers would expect their total share of completed residential projects to fall from 84 percent in 2014 to 53 percent between 2017 and 2019, JLL said.
Real estate analysts said local and mainland developers will have to adapt to the changing face of the city’s property market.
“To maintain a stable stream of land supply for residential units in future, local developers will need to use a range of resources rather than relying on government land sales to replenish their land banks,” said Zac Tang, a senior analyst at Colliers International Hong Kong. But, he anticipated a win-win scenario for both sides as local and mainland developers can learn from each other’s business strategies.
“Local players’ market expertise and knowledge of the local market, particularly in building regulations, will be very useful to mainland developers. In return, the interaction will be a boon for Hong Kong developers in penetrating the Chinese mainland market,” Tang said.
Local players’ market expertise and knowledge of the local market, particularly in building regulations, will be very useful to mainland developers.” Zac Tang, senior analyst at Colliers International Hong Kong