Land reclamation is key to solving Hong Kong’s housing woes, says tycoon Ronnie Chan

Land reclamation is the key to tackling the housing crisis that has made Hong Kong the world’s most expensive property market, according to tycoon Ronnie Chan Chi-chung.

“Otherwise, it will be difficult to solve the land shortage problem in Hong Kong,” he said after his company Hang Lung Properties announced a slump in first-half profit on Monday.

But he stressed he would oppose any reclamation work in Victoria Harbour.

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Underlying profit, which excluded revaluation gains in investment properties, was down 24 per cent to HK$2.32 billion (US$296 million) in the six months to June 30 because of a sharp fall in property sales.

Hang Lung said profit from sales plunged by two thirds to HK$565 million in the first half of the year while rental income from Hong Kong and the mainland rose 8 per cent to HK$3.12 billion.

The developer shifted its main focus from selling homes in Hong Kong to building and operating commercial properties in mainland China about two decades ago. Because of the city’s escalating land prices, Hang Lung has not successfully bid for land in Hong Kong for more than 15 years.

The company sold only eight homes in Hong Kong during the first half – three semi-detached houses at 23-39 Blue Pool Road in Happy Valley and five units of The Long Beach development in Tai Kok Tsui, Kowloon.

The builder now has 13 homes left on the market, worth about HK$4 billion in total – 12 at Blue Pool Road, which have stood vacant for three years, and a flat at The Long Beach development, which has not been occupied for 13 years.

It is trying to accelerate its sales after Chief Executive Carrie Lam recently unveiled plans for a tax on empty new apartments.

Lam also voiced support for a proposal put forward earlier this month by the Task Force on Land Supply to reclaim land in five locations at Tuen Mun, Sha Tin and Lantau Island.

He said the recent plunge in China’s currency might cause some short-term problems but the company’s performance in the current financial year is not likely to be hugely affected.

“We are monitoring the impact of the yuan’s movement on our company,” said Chan.

He said the recent fall in the yuan would have a positive effect on domestic consumption as Chinese people’s desire to shop in other places wanes.

Chan said Hong Kong might benefit from the escalating trade war between China and the US as investors’ confidence in the latter is rocked.

“If companies do not want to list in the US, maybe they will list in Hong Kong, like Xiaomi did,” said Chan.

Hang Lung’s net profit, taking into account HK$2.46 billion of revaluation gains on investment properties, jumped 22 per cent to HK$4.69 billion, or HK$1.04 per share.

Revenue fell by a fifth to HK$5.15 billion, though it beat Bloomberg’s consensus estimate of HK$4.64 billion.

Shareholders will receive an interim dividend of 17 Hong Kong cents per share, the same as last year’s.

The results are “disappointing”, said Raymond Cheng, head of Hong Kong and China research and property at CGS-CIMB Securities.

“Rental income in China stood at 11 per cent, which looks strong but 9 per cent of that was driven by the currency impact,” said Cheng. “Stripping out this, growth is only 2 per cent in yuan.”

Shares of the developer edged up 0.85 per cent to HK$16.58 on Monday.