Money Matters | Hong Kong’s developer cartel is beginning to lose its grip
The insane purchase price for a Kai Tak land site by mainland developer HNA Group illustrates how local developers are no longer the only game in town
When Hong Kong tycoon Lui Che-woo complains of difficulty in bidding against mainland developers at government land tenders, one can almost hear a cracking sound.
A two-decade long oligopoly is crumbling in. Falling apart is their dominance not only in land purchases but also pricing of flats.
Lui must be feeling a bit relieved with the news of Beijing clamping tighter control over overseas investment by mainland companies; though the reality is it won’t last long.
Invading the old world are aliens who don’t seem to be bound by the law of gravity, as seen by HNA Group’s HK$8.8 billion bid for the Kai Tak land plot.
If the purpose of these new comers is indeed to take money out from the country to mitigate political and depreciation risk, none of the old rules apply any longer
Cost is nothing. HNA, a Hainan-based conglomerate, is sitting on a 145 per cent net gearing while its Hong Kong competitor CK Hutchison is at 1.2 per cent. HNA is borrowing at 8.15 per cent, which is four times of what CK Hutchison is paying. Yet, it outbid local developers by almost a 100 per cent.