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  • Apr 18, 2014
  • Updated: 2:50am

New World Development

New World Development Co (HK stock code 0017) is a Hong Kong conglomerate with operations in property, infrastructure, transport, retailing telecommunications and bus and ferry operations.It is controlled by Chow Tai Food, a holding company owned by businessman Cheng Yu-tung.

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High building costs to limit price falls

NWD chief Henry Cheng sees declines capped at about 10pc, after developer lifts core profit 26pc

PUBLISHED : Thursday, 26 September, 2013, 4:11pm
UPDATED : Friday, 27 September, 2013, 12:07pm

Rising construction costs will act as a brake on falling property prices, limiting any declines to about 10 per cent, says New World Development chairman Henry Cheng Kar-shun.

"The fall in prices will be limited because construction costs have continued to increase. About 60 per cent of the development cost of a residential project is construction cost. We can only cut our profit margin or the land price drops [to lower the investment cost]," Cheng said yesterday, as the developer reported a 26.1 per cent jump in underlying profit for the year to June.

He said any falls in land price would be greater than those for property prices, adding that property prices might even go up because of a tighter supply of new housing.

Cheng believes the government should maintain its cooling policies for the property market, but with some "fine-tuning", such as exemptions from extra stamp duties for those buying properties through companies.

The latest round of cooling measures released on February 22 - which included the extra stamp duties - has led to a sharp decrease in property sales. New World's contracted sales in Hong Kong dropped more than 5 per cent to HK$8.7 billion during the past fiscal year, well short of its HK$11.04 billion target.

Joint general manager Adrian Cheng Chi-kong said the sales targets for this year were HK$10 billion for Hong Kong and HK$17 billion for the mainland.

"We have generated HK$4.2 billion from contracted sales since July, which is about 40 per cent of our sales target," he said, adding that the revenue came from the sale of 900 flats.

The company is aiming for total sales of 1,400 flats.

The developer's 26.1 per cent rise in underlying profit, excluding a property revaluation gain, amounted to HK$6.33 billion. Revenue rose 31.3 per cent to HK$46.78 billion, while net profit grew 39.5 per cent to HK$14.15 billion.

The strong growth was attributed to an increase in property sales in Hong Kong and on the mainland. Revenue from the property sales jumped 92 per cent to HK$24.25 billion.

Turnover from Hong Kong property sales surged 300 per cent, while mainland sales grew 40 per cent. The major contributors in Hong Kong were the Signature project in Tai Hang, Riverpark in Sha Tin and Double Cove in Ma On Shan.

While Sun Hung Kai Properties and K Wah International have flagged they will build more mass residential projects, Henry Cheng said the location of sites and demand would determine how they were developed. He added there was still demand for luxury flats.

The firm's gross rental income from Hong Kong investment properties rose 10.9 per cent to HK$1.46 billion.

The company will pay a final dividend of 30 HK cents a share.

New World shares fell 1.16 per cent to close at HK$11.88 yesterday.

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lamlm38
50% drop in prices sound more reasonable to us u cocksuckers!!!
caractacus
Another developer lying to keep the inflated property market going. He is afraid he may only make 300% profit instead of 500%.
XYZ
Stewart Leung (ex-New World) of Wheelock recently spouted the exact same nonsense about property prices in Tseung Kwan O where Wheelock is the largest single owner/developer. While it is true that deep-pocketed developers can withstand a drop in prices longer than the average speculator, as long as they're financing their developments primarily via debt (which, apart from Nan Fung, they all do), just like King Canute, they cannot command the tides of lower prices to reverse themselves merely by shouting into the wind.
samsaxena
Sure! LOL!!!
don67
Once again this guy's in developer wonderland. What he's trying to say is that for his company to maintain a decent profit margin, property prices can't drop by more than 10%. You can see that he's of the opinion that property developers in HK can/should only ever make profits, never losses.
m2leung
Ok, we will see when the secondary market falls 50% if New World can sell any unit that is 40% more expensive than anything else.
donniemcm
This is pure BS and marketing talk.
Then how can you explain the huge falls in 97 and 08. I would not dare to blatter such thing as construction cost as not certainly increase that much since.
For sure they want government to cut land prices instead of their 150% profit as well as their underlying company that sell the building materials at a huge premium.

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