Price surge in Hong Kong, China deters land purchases: Li Ka-shing

Companies controlled by Mr Li Ka-shing, Asia’s richest man, have slowed land purchases in Hong Kong and China, as prices have escalated to what he said are unhealthily high levels.

“Land prices in Hong Kong are high and already showing signs of an unhealthy situation. Land prices in China have surged, and we’re unable to win auctions for land,” he said, according to a statement yesterday from Cheung Kong Holdings

The comments by Mr Li, who controls Cheung Kong, the biggest real estate developer in Hong Kong, underline concerns that the authorities in the Special Administrative Region and on the mainland are struggling to tame an asset bubble fuelled by cheap credit.

New home prices last month jumped in all but one of the 70 Chinese cities tracked, said China’s National Bureau of Statistics. In Hong Kong, home prices remain more than twice as expensive as five years ago, though they have changed little this year.

“In China’s first- and second-tier cities, land prices are definitely too high,” said Mr Lee Wee Liat, an analyst at BNP Paribas. “But there’s no short-term solution as it’ll take time for land supply to increase. Cheung Kong is probably waiting for prices to come down before (it buys) again.”

Cheung Kong’s statement echoes Mr Li remarks in an interview with Southern Metropolis Weekly published yesterday. Prices in China have surged to a level that people are struggling to cope with and developers need to be cautious, said Mr Li. But he added that he is optimistic about the market and will continue investing if prices are reasonable.

China’s Evergrande Real Estate Group this month paid 5.14 billion yuan (S$1.06 billion)for a site in Beijing, a record for the Chinese capital, reported The Standard newspaper.

In September, Sun Hung Kai Properties, Hong Kong’s second-biggest builder, bought a site in Shanghai for 21.8 billion yuan, a record for the city.

But property sales in Hong Kong by Mr Li’s firms, including Hutchison Whampoa, totalled HK$4 billion (S$0.6 billion) this year — the lowest in 13 years — due to a lack of government approval, the weekly reported Mr Li as saying.

Hong Kong’s government has, since 2010, introduced extra property taxes and tightened mortgage lending in efforts to curb home prices that are now the highest among major cities, according to property firm Savills.

But Mr Li, 85, said any suggestion that his companies are withdrawing investments from Hong Kong is “a big joke” and that asset sales are driven by “business reasons”, according to the statement.

In another interview, Mr Li said his older son Victor, who has worked with him for almost 30 years, is ready to take over the running of his firms. Victor is financially prudent and detail oriented, he added.

Mr Li, who has amassed a fortune of US$29 billion (S$36.4 billion), according to the Bloomberg Billionaires Index, expanded his empire as Hong Kong weathered crises such as rioting in the 1960s, a property collapse in the late 1990s and the outbreak of the SARS virus in 2003.

Mr Li stepped up investing in Hong Kong real estate in 1967, after rioting incited by the Cultural Revolution depressed prices.

He also correctly forecast in 2007 that China’s stock-market bubble would burst and, in 2009, predicted the rally in Hong Kong’s home prices.

Source : Today – 29 Nov 2013

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