Developers looking to cash in on non-core assets

PUBLISHED : Wednesday, 07 August, 2013, 12:00am
UPDATED : Wednesday, 07 August, 2013, 3:36am

Hong Kong developers are looking to boost their flagging revenues from residential sales by selling car parking spaces and non-core assets.

Sino Land released another 734 car parking spaces for sale at the weekend, and associate director Victor Tin Sio-un said more than 95 per cent of the spaces, on offer between HK$1.15 million and HK$1.45 million depending on their location, had already been sold.

The developer is expected to generate more than HK$900 million from the sales. Cheung Kong, meanwhile, has agreed to sell its Kingswood Ginza Property shopping mall in Tin Shui Wai to Fortune Real Estate Investment Trust for about HK$5.85 billion.

The group posted a 13 per cent fall in first-half net profit to HK$13.4 billion last week, with earnings weighed down by sluggish home sales as the series of cooling measures took their toll.

The city's second-largest developer, Cheung Kong, generated just HK$2.8 billion from property sales in the first half, said BNP Paribas, compared with HK$26.16 billion for the full year in 2012 and a sales target for 2013 of HK$30 billion. Sino Land generated HK$3.64 billion from property sales in the first half against HK$12.15 billion for the year to December 31.

New World Development, which had set a sales target of HK$12 billion for the year, generated sales of just HK$3 billion in the first half.

"It is clear that major developers will not meet their sales targets or even reach 2012 levels," said Bocom International property analyst Alfred Lau.

Lee Wee Liat, regional head of property research at BNP Paribas, said sales were poor as a result of the cooling measures taken by the government. The measures had driven investors out of the market, leaving end-users to support sales, said Lee.

"They have to sell non-core assets and commercial properties to raise the money to pay for construction costs," he said.

The disposal of non-core assets would not generate sufficient cash flows to cover the fall in revenues from residential sales, said Lau, but developers were unlikely to resort to price-cutting.

"Developers will continue to push residential projects in the New Territories as the projects are targeted at end-users. But they will be content to see sales in urban areas continue at a slow pace," he said.