Macau bet pays well for China Overseas
Developer says its first project in the territory will exceed revenue forecasts
Macau's bustling property market may yield windfall earnings for China Overseas, the Hong Kong property arm of the mainland's construction ministry, which is due to launch its first Macau project this year.
The 1,000-unit La Cite residential project in Macau's Orient Pearl District, due to open in October or November, is now expected to fetch an average price of more than $16,000 per square metre, according to China Overseas chairman Kong Qingping, noting that an adjacent project has been almost entirely sold off at similar prices.
Mr Kong said the firm was investing more than $1 billion, including $300 million in land, in the 160,720 sq m project.
Based on the expected selling price, the five-tower development could yield sales revenue of more than $2.5 billion - useful income for a firm buffeted on its home turf by increasingly strict austerity measures designed to cool the booming property market.
The developer, which owns 11 million square metres of land bank in China, has nevertheless played down a new wave of controls imposed by the government. 'The main aim of the recent clampdown on the mainland property market is to curb prices in overheating cities only. We have a very diverse portfolio in different cities,' said Mr Kong.
Having expected a 20 per cent drop in Shanghai residential property prices this year, he said the decline would cause only limited damage to the firm.
'We only have about 700,000 square metres of land in Shanghai, most of which was purchased before 2002. The low acquisition cost will cushion [us against] the drop in price,' he said, adding that the firm would not acquire any sites in Shanghai this year 'unless prices are exceptionally low'. Macau, for now, is where the action is.
Unit prices at La Baie Du Noble, a project adjacent to La Cite developed by Kowloon Development, have more than doubled since January, and about 90 per cent of the units have been sold. Upper floor units are being offered at about $20,000 per square metre, according to property agents.
Despite maintaining a bullish view on Macau property market, Mr Kong said it was now difficult to buy similar sites in the former Portuguese colony. 'We acquired this site from Bank of China [in 2003] by chance only. Land costs have increased quite a lot since then.'
Private ownership of most sites in Macau adds considerable difficulty to replenishing the company's land bank, he explained.
The management of diversified investment group Hongkong Chinese said yesterday after an annual general meeting that the company would invest up to $200 million to develop a site in Macau, acquired for $238 million earlier this year, into a high-end residential project with a gross floor area of about 300,000 square feet.
