HK developer blames China for cost rises
SHK chief says prices of developments are rising at 10pc a year because of squeeze
Hong Kong builders face increases of more than 10 per cent a year in construction costs because of competition for workers and materials from projects on the mainland, according to Sun Hung Kai Properties, the world's biggest developer by market value.
"We are seeing double-digit increases every year and we will be seeing this for quite some time," Sun Hung Kai deputy managing director Victor Lui said. "There are a lot of projects going on in mainland China and we are competing with them for everything: materials, workers, even architects, designers and surveyors."
Hong Kong is the world's most expensive place to buy a home after prices rose more than 90 per cent since early 2009 on a lack of new supply, an influx of buyers from the mainland and record low mortgage rates.
Rising construction costs may further drive up prices, which have now gone higher than in 1997.
Construction costs for most projects in Hong Kong ranged from HK$3,000 to HK$4,000 per square foot, with luxury projects costing more, Lui said. "When homebuyers see costs going up at this pace, they would expect prices to rise in the future."
Sun Hung Kai reported staff costs rose 13 per cent to HK$5.05 billion in the 12 months to June 30 from the year earlier, according to its annual report published last month.
Sun Hung Kai, which generated the most new-home sales among Hong Kong developers last year, is accelerating its pace of offerings again, according to Centaline Property Agency.
It accounted for 22 per cent of the market in the first half, down from 35 per cent for all of last year, Centaline figures show.
The company aimed to complete sales of 95 per cent of the 1,075 units at its Century Gateway project in Tuen Mun by the middle of this month, Lui said.
As many as 20 per cent of the buyers of the project were "permanent Hong Kong residents with businesses in neighbouring Shenzhen", he said.
Buyers from the mainland accounted for 17 per cent of all Hong Kong home sales by value in the second quarter, the lowest since the first quarter of last year, according to Centaline.