Why has China Vanke arrived in Tsuen Wan now? I smell politics
There is no compelling financial explanation for the absence of mainland property developers from the city until now, but several political ones
On Wednesday, China Vanke, the mainland's largest property developer, created a stir by acquiring a residential site on the Tsuen Wan waterfront in partnership with New World Development. It was Vanke's first foray into the local property market.
The big question is, why now? Most analysts have come up with economic and financial explanations. I, however, smell politics.
Let us take a look at the economic reasons first. The primary one being given is that a drop in profit margin has pushed mainland developers into the potentially lucrative Hong Kong market.
It is true that the good old days of windfall profit have long gone, given Beijing's tight control over the housing market. Debt-ridden local governments are becoming serious about collecting windfall taxes that can shave as much as 60 per cent off a developer's operating profit.
Mainland developers have seen their profit margin drop by more than a quarter, to about 25 per cent, over the past five years. The 45 per cent margin enjoyed by their Hong Kong peers is mouth-watering. Yet this has been true for some years.
Some say that mainland developers have not had the huge balance sheets until recently to compete with the tycoons who have monopolised Hong Kong property development for years.