HK luxury home prices may rise 15%

Cheung Kong Holdings also says HK and China’s property markets not in bubble situation

Hong Kong’s luxury home prices may rise as much as 15 per cent this year, and there are no bubbles in the city’s and China’s property markets, said Cheung Kong (Holdings) Ltd, the builder owned by Asia’s second-richest man, Li Ka-shing.

Prices for luxury homes may increase 10-15 per cent this year, and for new mass-market homes 15-20 per cent, said Cheung Kong executive director Justin Chiu in Hong Kong yesterday. Revenue from China home sales may exceed 30 billion yuan (S$6.14 billion) this year, he said. That compares with his September forecast of 1.5 billion yuan for 2009 sales.

‘I don’t really see a bubble,’ Mr Chiu said. ‘There shouldn’t be too much concern about the governments trying to crush the market.’ Mr Chiu’s comments pit him against investor Jim Rogers, who said on Tuesday that real estate prices in the city and Shanghai are in a bubble and ’should decline’. Property prices in 70 cities across China climbed 7.8 per cent in December, the fastest pace in 18 months. Hong Kong’s real estate prices rallied the most among the world’s major housing markets last year, according to property adviser Knight Frank LLP.

Prices in the last six months of 2009 rose by 30 per cent in Hong Kong and 20 per cent in China, leading Mr Chiu to conclude that speculators may be at work.

‘We think that the substantial increase in such a short time, means that there could be a speculation element,’ he said. ‘That’s why I advise buyers to really see whether they have the means to commit to buying an apartment. They should be careful.’

Record new loans fuelled a 75.5 per cent jump in China’s property sales last year. Home prices in Hong Kong, a trading and financial hub for China, are at their highest in almost 12 years, leading the World Economic Forum and Goldman Sachs Group Inc to caution about the formation of asset bubbles.

Homes sales in China, Hong Kong and Singapore by Cheung Kong, the world’s second-biggest developer by market value, may exceed HK$100 billion (S$18 billion) if the company obtains government consent for all projects, Mr Chiu said.

Cheung Kong’s share price fell 1.9 per cent to HK$98.10 as of 2.40 pm in Hong Kong. The stock’s 37 per cent gain last year made it 2009’s worst performer in the six-member Hang Seng Property Index. It has dropped 1.8 per cent this year, compared with the 4.5 per cent decline in the index.

Fred Hu, Goldman Sachs’s chairman for Greater China, said on Jan 18 that property prices in China require monitoring for signs of bubbles forming.

Prices at some luxury residential projects in Shanghai doubled last year, with Shui On Land Ltd’s Casa Lakeview recording sales of 100,000 yuan per square meter in December, Lee Wee Liat, an analyst at Nomura International Hong Kong Ltd, said last week.

Mark Mobius, who oversees US$34 billion of developing-nation assets at Templeton Asset Management Ltd, disagrees with Mr Rogers, saying on Jan 7 that the bubble in China’s property market isn’t about to burst. Gross domestic product rose 10.5 per cent in the fourth quarter from a year earlier, according to the median of 41 forecasts in a Bloomberg News survey for the release scheduled today.

‘The Chinese will act rationally and they’re not going to kill the market,’ he said.

Mr Rogers, author of A Bull in China, said in on Tuesday that real estate in Shanghai and Hong Kong is ‘very overpriced’. Hong Kong ‘Limited’ Garry Evans, head of global equity strategy at HSBC Holdings Plc, said in a Bloomberg Television interview on Tuesday that ‘China is no way near a bubble’. Hong Kong developers, including Kerry Properties Ltd, Shui On and Hang Lung Properties Ltd, are building homes, offices and shopping malls in China to capture market share in the world’s fastest-growing major economy. The strategy will continue even as China acts to cool the property market, analyst Adrian Ngan said.

‘It’s a long-term strategy, it’s a must, because the growth in Hong Kong is very much limited,’ Mr Ngan, a Hong Kong-based analyst at CCB International Ltd, said before Mr Chiu’s comments.

To cool property speculation, China this month reinstated a sales tax on homes sold within five years of their purchase, and the country’s Cabinet on Jan 10 urged strict applications of a 40 per cent down-payment requirement for second homes.

China accounts for about 10 per cent of Hong Kong-based Cheung Kong’s earnings, Mr Ngan said.

Ronnie Chan, chairman of Hong Kong-based Hang Lung Properties Ltd, said the tightening measures in China will not have an impact on the company’s real estate projects in the country because ‘we have zero debt’. Hang Lung’s strategy of focusing only on developing commercial properties in China helps the developer avoid being affected by volatility in residential prices, the target of tightening efforts, Mr Chan said at a financial forum in Hong Kong yesterday.

Hong Kong home prices, where average values climbed 33 per cent, rose the most among the world’s major housing markets last year, according to property adviser Knight Frank LLP. An index of existing homes is at its highest since March 1998, according to a weekly weighted measure developed by Centaline Property Agency Ltd and the City University of Hong Kong.

Billionaire Mr Li, 81, is dubbed ‘Superman’ by Hong Kong’s media because of his track record for investing. He has a 41.7 per cent stake in Cheung Kong after adding to his holdings 29 times since December, stock exchange filings show.

Mr Li, estimated to be worth US$16.2 billion by Forbes magazine in March, correctly predicted in 2007 that China’s stock market was in a ‘bubble’.

Source: Business Times, 21 Jan 2010