Yuzhou Properties says Hong Kong’s low financing costs attractive to mainland developers
Chairman Lam Lung-on sees mainland home prices rising 10 per cent in the second half on pent-up demand
Medium-sized mainland Chinese developer Yuzhou Properties joined its bigger rivals in expanding to Hong Kong, making its foray into the city’s market in 2014. Lam Lung-on, the founder and chairman of the Fujian company, said the 27-storey luxury residential project in the prime West Mid-Levels area on Hong Kong Island, was expected to be completed by the end of next year, providing 80 units. He said Hong Kong’s low financing cost was very attractive to mainland developers and his company would keep looking for opportunities to invest in the city’s housing market.
What is your sales plan for your Hong Kong project?
The 80 flats are worth about HK$700 million to HK$800 million. The project will not make a big contribution to the group’s sales but it gives us an opportunity to learn design and construction skills from the Hong Kong team.
We plan to either sell or keep the flats as service apartments as both are good choices. If we sell, the average price will be more than HK$30,000 per square foot, compared with our cost of HK$11,000 per square foot. If we rent them out, the annual return could be more than 5 per cent. As we are listed in Hong Kong, the project can provide cash to support our office operations in the city.
The development approval process in Hong Kong is very transparent and follows the rules. It is good for developers. The financing cost here is also low, only 2 per cent (annually), much cheaper than the 5 to 6 per cent on the mainland. That absolute advantage has prompted us to consider holding the property.