China developer’s net profit at Hong Kong’s old Kai Tak airport to lose altitude amid turbulence in property market

China Overseas Land & Investment is likely to see about a 15 per cent profit margin on its latest HK$8.03 billion parcel acquisition at the city’s old airport site, far less than the windfall it made five years ago on its first purchases there, analysts say.

China Overseas was the first developer to buy land at Kai Tak, site of the city’s old airport known for nail-biting manoeuvring by pilots to avoid mountains and buildings.

That was in 2013, when the developer paid far less per square foot for two parcels than in its latest land purchase on December 27. On those early purchases, it netted an estimated 53 per cent to 79 per cent profit, according to calculations by Victor Lai Kin-fai, a managing director at Centaline Surveyors.

That higher cost will cut into its profit margin. But so will a downturn since August in the city’s property market, which has pressured developers to offer new projects at lower prices to woo nervous homebuyers. Meanwhile, once the downturn is over, which is expected in 2020, home prices are not expected to run up as quickly as in the recent property bull run.

Lung Siu-fung, a property analyst at China Merchants Securities, expects the Chinese developer’s project on the newly acquired plot will launch in 2021 at an average selling price of HK$27,000 per square foot and yield a net margin of about 15 per cent.