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Doris Chan

Mainland-based property developer Shimao Group is investing more than five billion yuan (about HK$4.6 billion) in a luxury residential development in Pudong, Shanghai.

Chairman Hui Wing-mau said the fast-expanding luxury residential market in Shanghai would yield good returns due to growth in demand.

'We expect to see a profit margin of up to 30 per cent in most of our developments in Shanghai,' he said.

Mr Hui said his confidence was reinforced by China's coming entry to the World Trade Organisation, which would result in a flood of overseas companies into the mainland.

Shimao Group acquired the 220,000-square-metre waterfront site in Lujiazui, Pudong last year for the Shimao Riviera Garden project and plans to develop it into one of the most luxurious developments in Shanghai. The site will provide six 48-storey to 53-storey apartment blocks and a 60-storey serviced apartment tower.

With a total floor area of about 700,000 sq metre, the project will also include six theme parks.

Mr Hui said the development cost of more than five billion yuan represented an average of 10,000 yuan per square metre.

He estimated the project could realise about 10 billion yuan from the sale of its 3,000 units.

The group expects to launch the first phase of the project in September at an average price of about US$2,000 per square metre.

Mr Hui said Shanghai's luxury residential market was supported by growing demand and would outperform Hong Kong's.

The glory days of Hong Kong's high-end residential sector had gone and the slow economic recovery was unfavourable to property investment.

'In Hong Kong, it is quite difficult to sustain growth in the luxury sector in view of its economic recession,' he said.

Mr Hui said the Shanghai government was supportive of luxury residential developments.

While more than 3,000 small developers in Shanghai were engaged in mainly small projects, quality and prime developments were highly encouraged by the Government in an effort to upgrade its image and attract foreign investors, he said.

Shimao Group is also planning to build a 60-storey retail-hotel-office complex in Nanjing Road as its flagship commercial building in Shanghai.

In the early 1990s the company focused on property opportunities in southeastern Fujian province, in Hong Kong and in Australia.

It claimed to have emerged as one of the largest developers in Beijing over the past three years.

The Shimao Group invested in luxury properties in Hong Kong during the market boom in 1996 and 1997.

Mr Hui said most of those investments ended in losses and the group had resolved to seek more opportunities on the mainland.



Shimao Group chairman expects profits of up to 30pc from Shanghai luxury residential market