K Wah International gloomy about Hong Kong property as it reports profit slump
Firm says first-half sales fell 16pc to HK$3.31b and warns that city's home prices could fall 20pc because of government's cooling measures
K Wah International forecasts Hong Kong property prices to fall 10 per cent to 20 per cent if the government keeps its cooling measures in place.
"Property prices will drop," the firm's chairman, Lui Che-woo, said yesterday while announcing half-year earnings that included a 16 per cent drop in revenue.
"The government's cooling measures are aimed at lowering prices so that people can buy their own flats. But the cost of construction is rising. We hope the government releases more sites for sale, in order to lower land costs. It would help us to offset the impact of rising development costs."
The company said its net profit plunged 69 per cent to HK$888 million in the first half as sales dropped to HK$3.31 billion.
Executive director Alexander Lui Yiu-wah said he expected the luxury residential market to be "quiet" over the next two years.
K Wah generated HK$3.1 billion from contracted sales in the first half, of which some HK$1.8 billion were booked in the period.
The company plans to increase its investment property portfolio from 120,000 square metres to 200,000 sq m over the next three to five years.
"Most of our luxury projects were released to the market in 2012 and only special flats are left," said Paddy Lui Wai-yu, another executive director. "The sites we bought recently are aimed at end-users. They could meet the market's needs."
The firm will keep some of the flats at The Palace and Grand Summit, two residential projects in Shanghai, to develop into serviced apartments. The serviced apartment plan has a total floor area of 50,000 square metres. "We are aiming at generating higher recurring income by reserving parts of the properties in prime locations," she added.
One of the firm's major investment properties is K Wah Centre in Shanghai.
"Most of our luxury flats were sold last year. That caused the contribution from Hong Kong properties to drop this year. But we hope to launch a mass residential project in Tseung Kwan O and a luxury project at Grampian Road next year," Alexander Lui said, adding that the Tseung Kwan O project would have 400 to 500 flats.
The developer plans to start selling flats in a new luxury project in Tai Po in the second half of the year.
Paddy Lui said the company was optimistic about the mainland market for the second half. "Property sales have been strong, better than expected. We hope the growth can offset the impact of cooling measures on Hong Kong property sales."
The company declared an interim dividend of five HK cents a share, the same as last year.
Shares in K Wah International edged up 0.55 per cent to close at HK$3.66 yesterday. The Hang Seng Index rose 0.8 per cent.