Hong Kong’s third-richest man, Lui Che-woo, joins chorus of warnings about property market

Hong Kong’s third-richest man has a word of warning for property buyers in the world’s least affordable city to own a home: by all means get something to live in, but do not be sucked into speculation.

Lui Che-woo, chairman of developer K Wah International Holdings, said on Wednesday that the US-China trade war and the Hong Kong government’s policy aimed at curbing prices would cause a lot of uncertainty.

“It is fine to buy a home for self use. But for speculation, it is just like gambling when Hong Kong home prices surge to the world’s most expensive,” he said.

He was speaking after K Wah reported that underlying profit plunged 98 per cent to HK$32 million (US$4.1 million) for the six months ended June 30, after a change in accounting policy meant that it was unable to book sales from uncompleted properties in the period. Instead, it said agreed sales of unfinished properties worth a record HK$18.5 billion would be accounted for in the next 24 months.

Net profit, including revaluation gains on investment properties, declined 73 per cent to HK$578 million, while revenue plunged 87 per cent to HK$623 million.

The company declared an interim dividend of 6 HK cents per share, up 20 per cent year on year.

Lui’s comments on the property market were the latest to point to difficult times ahead. This week, investment bank CLSA said prices would drop 15 per cent over the next 12 months in the face of rising interest rates, a slowing economy and depreciating yuan.

It was the third financial institution to forecast a fall in prices, with Citibank and UBS also predicting a sharp downturn. Property consultants Knight Frank, meanwhile, said on Wednesday that the city’s home price growth would decelerate in the second half due to government intervention and external uncertainties.

And there are signs that buyers are having second thoughts, with some pulling out of deals and forfeiting big deposits amid the uncertainties.

For K Wah, its reliance on government land would put it at a disadvantage under current high land prices in Hong Kong, according to Lung Siu-fung, an analyst at China Merchant Securities International.

“It does not have what other developers have, such as old buildings for redevelopment or farmland [for converting to residential use],” said Lung.

Shares of the company stood at HK$4.350 at 10.27am, up 0.46 per cent, after the market opened on Thursday.

Separately, developer Sino Land has released the price list for the first batch of 50 units at its Madison Park project in Cheung Sha Wan, at an average price of HK$19,826 per square foot after factoring in as much as 14.75 per cent in discounts.

The development, a joint project with the city’s Urban Renewal Authority, comprises 100 units with sizes ranging from 301 square feet to 443 square feet, with one to two bedrooms. The cheapest unit is a 301 square foot flat on the 6th floor costing HK$5.57 million, or HK$18,517 per square foot after discount.