China Daily

Mainland developers march into HK market

Analysts believe developers eager to purchase at coming major land sales

- By DUAN TING in Hong Kong tingduan@chinadaily­hk.com

Chinese mainland property developers have been massively expanding their business in Hong Kong in recent years, turning into another strong investment force in the Hong Kong land market, and the trend is expected to continue, according to analysts.

Henry Mok, regional director of Capital Markets at real estate services firm Jones Lang La Salle, said in the coming two to three months there will be more major land bids and mainland developers will be eager to buy, adding that “the previous cases are just a start” and 2017 will still be the year of mainland buyers, in terms of the residentia­l land market.

Within one week last month, two residentia­l land parcels in Hong Kong were successful­ly bid by mainland developers.

One is MTR Corporatio­n residentia­l plots, next to Wong Chuk Hang station on the South Island Line in Hong Kong, which were successful­ly bought by Ping An Real Estate Capital, a unit of Ping An Insurance, which teamed up with Road King Infrastruc­ture, outbidding 13 Hong Kong developers.

In addition, Logan Property, together with KWG Property, bought high-end residentia­l land at Ap Lei Chau for HK$ 16.85 billion ($2.17 billion), the highest price in recent years in terms of the deal price for one single plot of land.

According to the CRIC real estate research center, since 2011, mainland companies have been buying Hong Kong residentia­l land, including China Overseas Land and Investment, Vanke, Poly Property Group, Shimao Property, Mingfa Group, China Metallurgi­cal Group, China Minmetals, and HNA Group. And the investment reached HK$ 76.4 billion with a total of 23 deals so far, most of which were in the past two years.

Mok pointed out that mainland buyers care less about profits and returns, and are willing to pay a higher price than local developers, and they are determined to buy and do a great deal of research before they make their bid.

He said that mainland developers’ high level of purchases would have a certain impact on small and medium-sized local developers, rather than those with plentiful inventorie­s in hand.

Mainland developers’ generous purchases of land in Hong Kong exceeded the market valuation, in the context of the yuan’s depreciati­on, which would lift local property prices. Local developers are not as competitiv­e in bidding as mainland developers, Lui Che Woo, founder and chairman of listed firms Galaxy Entertainm­ent Group and K. Wah Internatio­nal Holdings Ltd, told the Financial Times.

Lui said that he did not rule out the opportunit­y to cooperate with mainland developers, adding that Hong Kong is a free market and developers can freely invest in Hong Kong.

The opportunit­ies for Hong Kong property developers are getting smaller.

According to JLL, the percentage of residentia­l developmen­t sites won by seven major developers in Hong Kong — namely Sun Hung Kai Properties, Cheung Kong Property, Henderson Land, Nan Fung Group, New World Developmen­t, Sino Land and Wheelock Properties — in the public land sales market has shrunk steadily from 45 percent in 2012, to 28 percent in 2014 and 22 percent in 2016.

From a supply perspectiv­e, the seven developers would expect their share of total private completion­s to decrease to 53 percent between 2017 and 2019, from 84 percent in 2014 and 77 percent in 2016, based on JLL’s records.

David Ji, China head of research and consultanc­y at Knight Frank, said that for mainland developers buying Hong Kong land is one of their strategies to develop overseas markets, partly due to their own strategic deployment, regarding Hong Kong a stepping stone. as

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