Developer Hang Lung sees profit plunge 23pc

Developer says government cooling measures, which hit earnings, are likely to stay in place until housing supply catches up with demand

PUBLISHED : Thursday, 01 August, 2013, 12:00am
UPDATED : Thursday, 01 August, 2013, 5:31am

Hang Lung Properties, which saw underlying net profit drop 23 per cent in the first half of the year, said Hong Kong's housing market has entered a "cold winter".

Ronnie Chan Chi-chung, chairman of the company and a key supporter of government chief executive Leung Chun-ying, said the government's policies to cool property prices are likely to remain in place in the near future. But he said there was no need to further tighten the measures since transactions had already hit a two-decade low.

"When housing supply catches up with demand it will be the right time to remove these measures," Chan said

He said the group, which sold only five units in its two developments - HarbourSide and AquaMarine in the six months to June, has chosen "price" over "quantity", adding there may be chances for the developer to clear the remaining 1,400 units in the next few months.

The average unit sales price was HK$39,000 per square foot at HarbourSide and HK$10,600 per square foot at AquaMarine.

The group saw its worst half-year sales in Hong Kong since 2008 following the introduction of new transaction duties and tightened mortgage lending as part of the government's efforts to curb asset bubbles.

Rental profit for the group's mainland operations - which made up more than half its revenue - jumped 12 per cent in the six months to June, a sharp slowdown from a growth of 26 per cent over the same period last year.

But its earnings excluding revaluation gains and deferred tax, despite falling 23 per cent to HK$1.93 billion, beat a median estimate of HK$1.82 billion by five analysts surveyed by Bloomberg.

Chan said he was optimistic about the mainland's long-term prospects despite slower economic growth and high-end consumption. The group acquired land in Wuhan for 3.3 billion yuan (HK$4.14 billion) in February to develop a high-end shopping mall. Despite weakened sales, Chan said the company still has more than HK$38 billion in cash and will acquire more land on the mainland when the opportunity arises.

Chan, who had a war of words with Financial Secretary John Tsang Chun-wah earlier last month over government spending policies, said he purchased land in Tung Chung with four other developers earlier this year, indicating that he has no plan to withdraw investments from the city.

Hutchison Whampoa's plan to sell its supermarket chain ParknShop has triggered speculation that the group's owner Li Ka-shing, who backed Leung rival Henry Tang Ying-yen during the chief executive election, is moving capital out of Hong Kong.

Hang Lung's shares closed 0.2 per cent higher at HK$25.15 yesterday. It will pay an interim dividend of 17 HK cents.