Saturday, October 31, 2009

Hong Kong tycoon sheds stock, loads up on land

BILLIONAIRE Lee Shau-kee said he has sold as much as 30 per cent of his Hong Kong stock investments and is buying land, betting that the government’s efforts to cool home prices won’t work.

Mr Lee, chairman and controlling shareholder of Henderson Land Development Co, has put HK$20 billion (S$3.6 billion) of proceeds from the sale of shares into real estate, he said at a press conference in Hong Kong on Thursday.

Hong Kong’s third-richest man is increasing his holdings as the government tries to rein in a 28 per cent surge in home values that’s sparked tensions with the city’s developers. The government has raised downpayments for luxury apartments and threatened to intervene if the market becomes ‘unhealthy’.

‘The new mortgage measures are not going to have much impact on luxury home prices,’ said Mr Lee, 81, whose wealth was estimated at US$9 billion by Forbes magazine in March. ‘Most of those buyers are tycoons and don’t need to take up mortgages to buy.’

Mr Lee’s comments came as Hong Kong Financial Secretary John Tsang stepped up criticism of developers’ sales tactics and expressed concern that the boom in the luxury market would spread to smaller apartments.

‘Developers should not mislead the market or distort the public’s views on the market,’ Mr Tsang told legislators on Thursday, according to a transcript on the government’s website. ‘I’m concerned about the confusion over the recent sales tactics and transacted prices of the primary residential market.’

Lawmakers have criticised Henderson for renumbering floors in its 39 Conduit Road development. The top floor of the 46-story building was labelled 88 because the number is considered lucky in Chinese.

‘Our clients like auspicious numbers and it’s common for Hong Kong developers to omit some floors,’ Mr Lee said on Thursday. The floor-numbering was specified in the developer’s brochures and is ‘nothing special’, he said.

Mr Lee also said the HK$439 million price paid for a duplex in 39 Conduit Road was ‘100 per cent real’. Henderson claimed the HK$71,280 per square foot price was a record for Asia.

‘I don’t lie,’ Mr Lee said. ‘Buyers like these apartments as they are similar to rare jewellery. The more expensive it is, the more the buyers like it.’

The increase in luxury prices hasn’t affected the mid-segment market, he said. An apartment larger than 1,000 square feet is categorised as luxury under local industry standards.

Hong Kong luxury home prices rose 28 per cent in the first nine months of 2009, according to Colliers International, while the benchmark Hang Seng Index almost doubled. On Oct 14, Hong Kong Chief Executive Donald Tsang expressed concern that a property bubble may be forming.

The Hong Kong dollar is pegged to the US currency, so a decline in the US dollar makes the city’s assets cheaper for non-residents, boosting demand further. ‘With the depreciation in the dollar, if you don’t buy fixed assets, you will lose money,’ Mr Lee noted.

Henderson Land and partner New World Development Co will pay HK$9.6 billion for a building site, Mr Lee said.

Henderson is also spending more than HK$10 billion buying old buildings for redevelopment.

Values of homes of at least 160 square metres have broken a previous record set in the third quarter of 1997, the Hong Kong Monetary Authority, the city’s de facto central bank, said in an Oct 23 statement to banks when it tightened downpayment requirements.

Source: Business Times, 31 Oct 2009

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