Hong Kong’s deep-pocketed property developers look set to snap up cheap deals in mainland China, as a clampdown on bank lending and frosty stock markets bleed their Chinese rivals dry.
With their home market on the former British colony slowing, the likes of Sun Hung Kai Properties, Henderson Land, Sino Land and Hang Lung Properties are stepping up investments in mainland China.
Henderson Land told Reuters last week it expected $1.5 billion worth of annual sales of apartments in China from 2011 - more than its total turnover now. Because Chinese developers are suffering from an onslaught of government-inspired cooling measures, the firm has already found itself the only bidder for auctioned land - buying a plot in Nanjing last month at the set price. Last year, the local government received as much as four times what it asked.
“It’s so much easier to buy land now,” Henderson’s executive director John Yip said. Beijing has brought in a raft of measures to cool the property market, including a clampdown on loans for construction, a requirement for developers to build quickly or lose their land, and a tax on land price appreciation. The measures have had a mixed effect in a country where some 8 million people uproot to cities each year, with average prices still rising - up 8.2% in June from a year earlier. But the austerity measures have hit a few markets hard, especially in the southern cities of Shenzhen and Guangzhou.
There, speculation was rife as a stock market boom fed into property prices. Now the process is in reverse, with the benchmark Shanghai Composite index having fallen by almost half this year, compared with Hong Kong’s 18% fall. “Stock prices have fallen so much that people can’t make any profit,” said Zhang Haitian, a 36-year old housewife in Shenzhen. “Who has the money to buy apartments now?”
Housing prices in some areas of Shenzhen have dropped 20% since January. The malaise could spread, with Nomura analysts believing residential prices across China will decline 5-20% through the H1 of 2009. Land prices are likely to fall as thousands of local developers are squeezed by the credit controls, and many will be forced into fire-sales to survive. (Reuters)