New World Development

A whole New World of real estate fireworks

The real estate group hopes to emerge from the property pack and restyle itself as a major challenger to the biggest players in town

PUBLISHED : Tuesday, 30 October, 2012, 12:00am
UPDATED : Tuesday, 30 October, 2012, 4:25am

Sun Hung Kai Properties and Henderson Land pulled out of sponsorship of the New Year's Eve fireworks last year, creating a headache for the Tourism Board.

But the organisers will not have trouble creating an exciting display this time round, with rival developer New World Development taking over funding of the show. To be called "New Year, New World", the show is a sign to many of the start of a new era for the property market.

New World has ambitions to again become the third-biggest developer in the city.

More strong players should be welcome in the market, which has long been dominated by Cheung Kong (Holdings) and Sun Hung Kai Properties.

New World has a new sales and marketing team, following the retirement of former executive director Stewart Leung Chi-kin early this year. Their first project, The Riverpark in Sha Tin, was launched in June.

The new team is already making a difference. The sales office, which cost HK$50 million to build, has a small theatre to play its television advertisements. The design and decor of the sales office are now on the same level as the other major developers.

Other touches also are telling. Even with a mass residential project, the company provides high-end kitchen appliances. That's not new for the other major developers, but it is for New World. New World is trying to improve its brand image, something that could help it achieve higher selling prices and profit margins.

The changes at New World may be partly due to the fact that the third generation of Cheng Yu-tung's family is more involved in the business. It may also be because the company is aware that housing supply will increase significantly and so will competition in the small-flat market.

Sino Land, for example, is improving building quality and leading the market in the design of clubhouses, which became a major attraction of their projects.

Data from the official "Hong Kong Property Review 2012" report suggest that the new housing supply will grow by 26 per cent next year. About 91 per cent of the flats would be less than 1,076 sq ft, compared with 74 per cent this year. With the supply of small flats set to grow, developers have to package mass residential projects as luxury developments in order to achieve higher prices.

Also, as construction costs continue to rise, developers will have to resist cutting prices to lure buyers, even though supply is increasing. Packaging is their best tool for maintaining a high profit margin and competing with other developers. Advertisements, top-brand appliances and luxury clubhouses can perhaps convince buyers that the flats are value for money.

Henderson Land is the most successful case of a company improving flat quality and running fancy ads to attract buyers in last few years. In 2004, it ditched its old-fashioned marketing strategy of hiring one-time stars to perform in its sales offices and adopted the new approach to promote the Grand Promenade in Sai Wan Ho. The switch helped it grab record-breaking prices for the project, a feat it repeated again and again, reaching a peak five years later with 39 Conduit Road in Mid-Levels.

New World knows that when your competitors are improving, you can't avoid joining in.