Wharf turns cool on new mainland projects, citing policy measures
Beijing's measures to dampen housing bubble have turned HK developer cautious towards further mainland investment in short term
Wharf (Holdings) has turned cautious towards further expansion on the mainland, citing risks from Beijing's austerity measures designed to cool the market.
"Whether or not we will invest there aggressively under the current policy environment, I would say we have big reservations," Wharf chairman Peter Woo Kwong-ching said. "However, we will proceed with the projects that we have [already] invested in and will get it done well."
Wharf is the first major Hong Kong developer to raise concerns over the central government's policies towards the mainland's real estate industry.
Speaking after the annual general meeting, Woo said the company would be selective about development projects across the border. "The business model does not exist now because the market is affected by cooling measures," he said, though he added that the company would continue to look for long-term projects such as investment properties.
Wharf wants greater balance in its investments between the mainland and Hong Kong, as shown by its plan over the past few years to develop mixed-use-projects under the International Finance Square brand in mainland cities such as Chengdu, Changha, Chongqing, Suzhou and Wuxi. It also has various residential projects on the mainland and bought into Greentown China Holdings in 2012 as a strategic investor.
Wharf is aiming to post mainland property sales of 23 billion yuan (HK$29 billion) this year and has notched up more than seven billion yuan in property sales in the first five months of 2014. Woo said investment in mainland rental projects would continue as the company took a long-term view of the market.
While discounting on residential projects is becoming increasingly common in China since February, Woo said Wharf will follow market prices but refused to say which projects would see price cuts.
Rating agency Standard & Poor's believes China home prices will fall this year as developers cut prices to meet sales targets. Home prices will fall 5 per cent compared with an 11.5 per cent gain in 2013, it said in a report yesterday.
Sales volumes will improve in the second half of the year and rise 10 per cent for the full year, boosted by price cuts, according to the report.
Commenting on the government's move to seek opinions on a 20 per cent reduction in mainland visitors coming under the Individual Visit Scheme, Woo agreed a review is needed and would support the government's decision. But he said the review should look at the impact on jobs, saying it was a subject that politicians should not ignore.
Wharf is the landlord of major shopping centres such as Harbour City in Tsim Sha Tsui and Times Square in Causeway Bay.