Hong Kong’s ‘big four’ developers stand to win big from government’s proposed Northern Metropolis

Hong Kong developers sitting on massive holdings of farmland are expected to be the biggest winners of the government’s latest proposal to develop a new hub called Northern Metropolis.

While the plan covers an area of 300 sq km, the government will develop 600 hectares (1,480 acres) of land including farmland, wetland and brownfield sites, some of which is held by developers and private owners.

Sun Hung Kai Properties, CK Asset, Henderson Land and New World Development, the city’s top four by market value, together own a total of 106.3 million sq ft of farmland in the designated area, according to CGS-CIMB Securities.

“The four largest developers will stand to benefit the most among the local players from the new policies, due to their huge farmland reserves and extensive experience in developing farmland-converted mixed-use developments,” Raymond Cheng, the head of China and Hong Kong research at the brokerage, wrote in a report.

While some of the farmland might be acquired under local laws by the government for public housing and infrastructure, developers will still have profit margins of about 20 to 30 per cent because of the extremely low cost of land, Cheng said.

Chief Executive Carrie Lam Cheng Yuet-ngor on Wednesday said an innovation and technology corridor will serve as the engine of the Northern Metropolis. It will also include a new cross-border railway linking the city to the Qianhai economic zone in Shenzhen, and an extension of a local rail link that will stimulate development across Hong Kong’s rural hinterland.

Once the entire Northern Metropolis is fully developed, as many as 926,000 units, including the existing 390,000 flats in Yuen Long and North districts, will be available to accommodate 2.5 million people in 20 years, she said.

The metropolis will include existing new towns in Tin Shui Wai, Yuen Long, Fanling and Sheung Shui and their neighbouring rural areas, as well as six new development areas under planning or construction. They are Kwu Tung North/Fanling North, Hung Shui Kiu/Ha Tsuen, Yuen Long South, San Tin/Lok Mak Chau, Man Kam To and The New Territories North New Town.

Under this plan, CK Asset and Henderson Land could have their wetland sites around Mai Po acquired by the government, Shaun Tan, an analyst at UOB Kay Hian, wrote in a report.

Henderson Land had the largest holding of farmland in Hong Kong at 44.6 million sq ft as of June, according to its interim report. It said about 100,000 sq ft in Kam Tin was resumed by the government in the first half for public use for which it received a payment of HK$80 million. Another 1.26 million sq ft in Fanling New Development Area and Kwu Tung New Development Area was taken by the government in 2019, for which it was paid HK$1.75 billion

Still, Henderson Land has more than 4 million sq ft of gross floor area in the Fanling and Kwu Tung new development areas, according to its interim report.

SHKP holds 31 million sq ft of farmland, making it the second largest holder, while New World Development and CK Asset own 17.9 million sq ft and 12.8 million sq ft, respectively.

The shares of the city’s property developers continued to rise for a second day following the announcement of the Northern Metropolis plan.

Henderson Land jumped 7 per cent, SHKP advanced 2.4 per cent, New World Development rose 3 per cent and CK Asset added 1.2 per cent on Thursday.