Sun Hung Kai wrong-footed with the Arch apartments project in Shanghai

Sun Hung Kai Properties, Hong Kong’s largest developer by market capitalisation, has been caught flat-footed by a controversial policy in Shanghai barring the sale of apartments built on land designated for office or commercial use.

The developer has been forced to stop the sale of the remaining converted apartments at its luxury serviced apartment project, Arch Residence, on the Huangpu River in Pudong.

More than 100 buyers who bought the converted apartments last year for prices ranging from 9 million yuan (US$1.3 million) to 18 million yuan now face potential huge losses, according to sources.

“The value of this kind of apartment will certainly drop significantly as most buyers are unwilling to pour money in these properties. People don’t know what the government will do next with these apartments,” said Clement Luk, chief executive for east China at Centaline Property.

The 23-storey block, comprising more than 170 apartments, was built on a site designated for commercial use. The block of serviced apartments is part of the luxury development Shanghai Arch, one of the most expensive housing projects in Pudong. Flats developed on residential sites in the project will not be affected by the new policy.