Sun Hung Kai Properties next to get behind Hong Kong’s new subsidised starter homes scheme
The developer said it has identified sites for affordable flats after announcing core earnings up 7.4 per cent thanks to strong property sales
Sun Hung Kai Properties (SHKP), Hong Kong’s largest developer by value, said it has identified three possible sites suitable for building affordable housing under a new government-subsidised scheme to help young, first-time buyers.
That makes it the second homebuilder in the world’s most expensive city to get behind the “Starter Homes” initiative, which is due to be fleshed out in a policy address next month.
“After the chief executive [of Hong Kong] announces the details of the scheme in October, SHKP will take the initiative and is happy to cooperate with the government to increase the supply of flats,” said SHKP’s deputy managing director, Mike Wong.
The “Starter Homes” scheme was an election pledge by Hong Kong’s Chief Executive Carrie Lam Cheng Yuet-ngor to help young families who cannot afford private housing but earn too much to qualify for cheaper, public flats. She said last week that the scheme would be outlined in more detail in a policy speech in October.
Wheelock Properties was the first private developer to announce plans to provide subsidised flats under the initiative. It said on Tuesday it has applied to turn its farmland in Tai Po into a 2,705-unit mixed private-public housing development that will include 1,005 affordable starter homes.
Prices for private residential property have surged for 16 straight months, making Hong Kong – already the world’s priciest home market – even less affordable.
SHKP made the announcement on Thursday after reporting full-year core profit up 7.42 per cent, on the back of strong property sales.
The builder’s core profit, which excludes revaluation gains on investment properties, amounted to HK$25.96 billion (US$3.32 billion) for the year to June 30, slightly above the HK$25.76 billion consensus estimate of eight analysts compiled by Bloomberg.
The developer, which has a diversified portfolio of flats, retail and office space in both Hong Kong and mainland China, increased its final dividend by 7.1 per cent to HK$3 per share, from HK$2.8 a year ago.
For the year ended June, net profit jumped 27.92 per cent to HK$41.78 billion due to bigger revaluation gains on investment properties. The net profit included a HK$16.85 billion revaluation gain on investment properties, compared to HK$8.87 billion a year a ago.
Turnover declined 14.23 per cent to HK$78.20 billion.
Chairman Raymond Kwok Ping-luen said profit margins had been squeezed by escalating land prices.
He said the firm has a strong financial position with a gearing ratio, based on net debt to shareholders’ funds, of 7.2 per cent as of June 30.
His remarks came after Bloomberg reported at least four out of eight banks known to have provided a combined US$1.5 billion worth of short-term financing to China’s HNA Group for land purchases have decided not to renew that credit and do not intend to extend fresh loans to fund construction costs. Bloomberg cited people with knowledge of the matter who asked not to be identified discussing confidential client relationships.
“It [HNA] is an individual case. Its projects will find it difficult to make profit at today’s home prices,” he said.
Addressing speculation about disputes among the third generation of the Kwok family, the controlling shareholder of SHKP and one of Hong Kong’s wealthiest dynasties, he said that “all staff are strongly united in their efforts to do their best for the company.”
“The third generation are closely cooperating with each other. They are frequently attending meetings and eat together.”
Both Christopher Kwok, Raymond Kwok’s son, and Adam Kwok, the son of the former joint-chairman Thomas Kwok, are executive directors at SHKP.
Victor Lui, the deputy managing director, expects next year’s property sales target to be HK$41 billion, including Hong Kong and the mainland.
CIMB analyst Raymond Cheng wrote in a research note that SHKP is one of the largest beneficiaries of the government’s faster approval process for converting farmland into land for property development.
“We believe SHKP continues to benefit from the strong residential market in Hong Kong, backed by its ample land reserves which will allow it to grow in the next few years,” he said.
SHKP’s shares dropped 1.09 per cent to close at HK$135.3 on Thursday, before the release of the earnings results.