Hong Kong developer Wheelock sees cloudy second half as rate rise and trade war ripple through market
The company sold a record number of homes in the first half of the year
Hong Kong property developer Wheelock and Co expects headwinds in the second half as a sluggish stock market, rising interest rates and uncertainties from the US-China trade war bite, after it reported record sales of properties in the first six months.
The company rode a boom in the city’s property market in the first half of the year, with 2,021 residential units sold or pre-sold, translating into sales revenue of a record HK$23.4 billion (US$3 billion), more than double the figure in the same period last year.
However the company warned of clouds over the second half of the year.
“We’ve already seen the downbeat stock market impacted by uncertainties, including the further interest rate increase and the US-China trade war,” said Douglas Woo Chun-kuen, the company’s chairman and managing director. “They will also add pressure onto the property market.”
The median house price in Hong Kong had risen for 27 consecutive months until July in what is already one of the most expensive cities to own a home. But UBS has predicted prices will tumble as much as 10 per cent from this month to the end of 2019, while Citibank has forecast a 7 per cent fall in the second half this year.
Woo said that in such an environment, the company would be more selective when taking part in land bidding in the coming half year.
The company could also come under pressure from a government plan to tax vacant flats, announced in June as part of a series of measures to cool property prices.
Wheelock’s ultra luxury Mount Nicholson development on Hong Kong’s famed Peak, launched in 2016, still has no buyers for six houses and 16 flats, while 52 units worth more than HK$2 billion are unsold at its Grand Napa project on So Kwun Wat Road in the northern Tuen Mun district.
Residential projects deemed to be complete within a year of obtaining their occupation permits will be subject to the vacancy tax if they remain unsold. The levy, equivalent to two years of rental income based on market rates, is expected to be 2.5 per cent to 5 per cent of the value of the property depending on the rental yield.
Wheelock’s underlying profit, excluding revaluation gain on investment properties, dropped 6 per cent in the first half to HK$5.16 billion, according to a filing to the Hong Kong bourse on Tuesday.
The drop was mainly due to a change in accounting standards, which delayed the recognition of some of its sales, the company said. Group revenue dropped 47 per cent to HK$17.58 billion.
Including revaluation gains in investment properties, profit attributable to shareholders surged 37.8 per cent year on year to HK$8.6 billion, with earnings per share up to HK$4.21.
The company acquired two parcels of residential land in Kai Tak and Kowloon Tong in the first half year, which brought its total land bank to 6.6 million square feet.
Wheelock declared an interim dividend of 50 HK cents, up 5.3 per cent from a year ago. Its shares closed at HK$52.60 on Tuesday, little changed on the day.