Lai Fung plays down Guangzhou bubble risk

PUBLISHED : Thursday, 24 December, 2009, 12:00am
UPDATED : Thursday, 24 December, 2009, 12:00am

Lai Fung Holdings, which focuses on mainland property development, is playing down the risk of an asset bubble in Guangzhou despite seeing a large site in the city fetch a record sum this week.

Executive director Julius Lau Shu-yan said the accommodation value of 5,810 yuan (HK$6,598) per square metre paid by a consortium on Monday was within market expectations.

'It was a huge lump sum because the site covers a huge area,' he said after Lai Sun Group's annual general meeting yesterday.

On Monday, a consortium comprising Guangzhou R&F Properties, Agile Property Holdings and Country Garden Holdings paid 25.5 billion yuan for the site in Panyu, a satellite city in Guangzhou. The site will provide a gross floor area of 4.38 million sqmetres.

Prices in some mainland cities have surged in recent months and property consultant Knight Frank said recently that home prices in Shanghai were up 25 per cent from early this year.

Lai Fung focuses on Guangzhou and Shanghai and Lau said he did not see any sign of a property bubble in either city.

Over the next two years, he said the developer planned to release one million square feet of residential area for sale.

Despite government attempts to cool an overheated real estate sector, he said the firm had no plans to lower asking prices for upcoming projects.

Lai Fung's land cost was relatively low because it was acquired many years ago, said Lau.

The company has a land bank of more than 15 million sqft, largely in Guangzhou, Zhongshan and Shanghai. 'It will be sufficient for development over the next three years,' he said.

Lau said all the firm's projects had started construction, except Haizhu Plaza in Guangzhou, which was still resettling affected residents.

He played down the impact of Beijing's announcement that land purchases now required a down payment of at least 50 per cent of the total price, saying all its land had been fully paid for.

'Only sites in the rural area will allow the purchase of land by instalments. Otherwise, land sold in the major cities has to be fully paid for within 30 days,' he said.

Chief executive Lester Lam Hau-yin said the company would not engage in a bidding war with other land-hungry developers.

'We will look for other alternatives such as teaming up with other developers as part of our expansion,' said Lam.

In Hong Kong, Lau said the group had no plan to scale down its investment in the city despite the soaring cost of land.