K Wah’s financial chief says focus firmly on Hong Kong, Pearl River Delta and Yangtze River regions
‘I predict Dongguan will look very different in the next 6 to 12 months,’ says Oliver Lam
Oliver Lam, chief financial officer of Hong Kong developer K Wah International, spent the majority of his time on the road, before joining the company last year.
He previously spent 12 years overseeing infrastructure projects for the mainland group China Merchants Holdings (International), which has a business network spanning Asia and Africa.
“K Wah focuses on Hong Kong, the Pearl River Delta region and the Yangtze River region and we want to ensure our resources are used to develop quality projects in all three,” said Lam.
K.Wah International is a mid-sized property developer, and also holds a 3.8 per cent stake in gaming giant, Galaxy Entertainment.
Why does the company focus on just those three regions, and might it consider expanding into the Xiongan economic zone in Hebei province? [The Chinese government announced the planned creation of the Xiongan area earlier this month, modelled very much on Shenzhen and Shanghai’s Pudong]
We want to focus our resources on building quality projects in first- and second-tier cities only, and currently have operations in Hong Kong, Shanghai and the Pearl River Delta regions. We do not plan go into northern parts of China.
What is the business outlook for K Wah?
We have a strong project launch pipeline. We plan to sell seven projects both in Hong Kong and China, providing 3,000 units. As well as K City residential development at Kai Tak in Hong Kong, our other projects are Windermere and Azure in Shanghai, Huadu Jihua Plaza Phase 3 and J Metropolis Phase 4 in Huadu in Guangzhou, and Silver Cove Phase Three in Dongguan.
We recorded property sales of HK$13 billion in 2016, of which HK$6.7 billion have not yet been booked. The company also reaped HK$2.4 billion from the presale of projects in 2015, which are also yet to be booked. Together that amounts to HK$9.1 billion, most of which we expect to be booked in the 2017 financial year. The outlook is not bad.
What is your view of the Hong Kong and mainland property markets?
Hong Kong’s economy grew just 1.9 per cent in 2016 but Financial Secretary Paul Chan Mo-po
has forecast it to expand by 2-3 per cent this year.
As long as the Hong Kong economy remains stable, the housing market will be positive. The market was slow in the first half of last year as potential buyers were concerned about possible interest rate rises and the general economic outlook. But the turning point was the Brexit result in June last year. Since then real demand has started coming back to the market and those worries have eased among potential buyers.
Last month, there were 3,000 units sold in Hong Kong, still too small compared with annual demand of 15,000 units to 20,000 units.
We are also confident of the prospects in first- and second-tier cities in mainland China. Sales in Shanghai dropped after the government imposed property cooling measures, but prices remained firm.
In the Pearl River Delta, we are confident of our prospects in Dongguan, a city which is growing at a very rapid pace. There is a lot going on there, with many industries such as tech sector expanding fast. I predict Dongguan will look very different in the next 6 to 12 months.
What is the company’s strategy in bidding for land sites, amid what has become keen competition from mainland buyers?
We won our second site at Kai Tak at a price of HK$10,220 per sq ft in December, after HNA Group paid around HK$13,500 per sq ft for its adjacent two sites. We did not follow its lead, and did our own calculation on its worth. We are now working on the planning and design of that second Kai Tak site.
How do you view the growing number of mainland companies buying land sites in Hong Kong?
Hong Kong is a free economy with a low tax system and world-class infrastructure. It is bound to attract many companies from outside, not only mainland companies. Companies look at their own books when they consider investments. Capital resources are limited, so they are picking those that offer better investment opportunities. At the moment, many think Hong Kong is more attractive than mainland China.