Wharf Holdings warns China’s stringent property curbs could weigh on future profit

Hong Kong-listed Wharf Holdings, a leading developer in China with 100 billion yuan (US$14.2 billion) worth of assets, said mounting curbs in the mainland’s housing market could seriously affect its profitability, as it posted a 12 per cent drop in first-half underlying profit.

The company’s underlying profit stood at HK$2.24 billion (US$285 million) for the six months ended June 30 versus HK$2.53 billion a year earlier.

“This year, we see the severity of the curbs is even more higher, particularly those about controlling home transactions and pricing of new homes,” Stephen Ng Tin-hoi, chairman and managing director, said at a press conference to announce the company’s results on Thursday. “Of course, we build homes to sell to get a reasonable price. But when we sell, if we are subject to restrictions of selling price, it will affect our return.”

The mainland city of Suzhou, where Wharf has some projects, announced the fourth round of tightening measures to dampen housing demand within two months in late July. The new measures involve home resale restrictions, scrutiny of fund sources and increasing the deposit for land bidding.

Also late last month, the Communist Party’s Politburo, China’s top decision-making body, warned against “using property as a tool to stimulate the economy in the short-run”.

Wharf’s attributable contracted sales in China dropped by 10 per cent to 6.5 billion yuan in the first half. It sold 1,400 units totalling 192,000 square metres during, a decline of more than 30 per cent.