After two years of rapid expansion, Chinese developers back off from Hong Kong projects
A report from S&P Global Ratings shows that Chinese real estate companies bought only 11 per cent of land in tenders in Hong Kong in the current financial year, down from nearly 50 per cent in the previous two years
Concerns about Hong Kong developers losing market share to their Chinese peers are fading as mainland companies have pulled back from their breakneck expansion in the city, according to a report from S&P Global Ratings.
“Mainland developers took up nearly half of the land tenders during the financial years of 2015 and 2016, but their share has dropped to only 11 per cent in the current financial year,” because of the effects of Chinese capital controls and tighter scrutiny on overseas investments, said Esther Liu, who led the research on the latest report released by the ratings agency on Monday.
Liu also highlighted that the longer project cycle length in Hong Kong had increased capital costs and added pressure to the balance sheet of the mainland developers.
“It is typical for major local developers like Sun Hung Kai Properties to take two to three years for developing a new project. But mainland developers such as Country Garden and Vanke were used to developing projects in a shorter time span on the mainland, from land acquisition to presale,[sometimes] as short as six to nine months only,” she said.
Chinese developers also needed more time to gain experience managing pre-project work in Hong Kong such as project orientation and design.
The report also warned that the rise in property prices may not fully offset the land costs for the developers.
Chinese conglomerate HNA Group spent HK$27.2 billion (US$3.5 billion) on four land plots at Hong Kong’s former airport site in Kai Tak over four months since November 2016.