Hong Kong real estate players embark on northern metropolis plan
CARRIE Lam’s plans for a new metropolis in northern Hong Kong have come as a great relief to investors in the city’s real estate giants.
Shares of leading developers, including Henderson Land Development Co, surged a day after chief executive Lam unveiled her goal of turning the remote northern part of the New Territories into an urban area for 2.5 million people.
While the plan covers an area of 300 km², the government will develop 600 ha of land including agricultural land, wetlands and brownfields, some of which is owned by developers and private owners.
Investors are betting the move – aimed at easing Hong Kong’s housing crisis – will benefit developers who own large swathes of land in the region.
They are also applauded by the absence in Lam’s address of any measures to cool the housing market, such as increasing taxes.
It throws a cloud over speculation that the Chinese government may put more pressure on property moguls to fix the city’s housing problems.
“Developers who now have the most farmland will benefit the most from this political discourse,” said Philip Tse, director and head of real estate research in Hong Kong and China at Bocom International Holdings Co.
“The market reacts to both: the pressure on politicians is lower and there is potential for more business for them. “
The Hang Seng Properties Index rose 2% on Thursday, reducing this year’s decline to around 5%.
Henderson Land jumped 7.1%, the highest in two years.
New World Development Co closed up 3% and Sun Hung Kai Properties Ltd rose 2.4%. CK Asset Holdings Ltd advanced 1.2%.
According to analyst Kenny Ng, the project can create value for builders who own more land in the area, when they turn it into houses or sell it to the government.
“Initially, the market feared that the housing supply would increase significantly in the short term after the political speech, but the policies have been relatively soft,” said Ng, securities strategist at Everbright Sun Hung Kai Ltd.
“This eased market concerns, thus benefiting the actions of real estate developers. “
The owners of the New Territories are already betting on the metropolis plan.
Some are putting their apartments up for sale at prices 3 to 5% above the market level, according to Lam Lam, sales manager at Midland Realty specializing in the Yuen Long district, part of the target area for development.
“As the news, including upcoming infrastructure in the area, is promising, the owners are very positive about the future,” Lam said.
“They won’t be offering a lot of discounts now.”
Real estate companies will also be dampened by the likelihood that the plan will not tame high house prices in Hong Kong anytime soon.
“It’s not something that can happen instantly,” said Patrick Wong, real estate analyst at Bloomberg Intelligence.
He estimates that home values in Hong Kong will increase between 5% and 10% this year.
Home prices in Hong Kong have hit an all-time high, joining other global real estate markets that are skyrocketing on low mortgage rates and growing demand as the pandemic slowly recedes. Bloomberg