Hong Kong tycoons buy cheap Chinese real estate

The government’s tightening control of leverage and credit markets has sparked a wave of defaults in China, and limited the ability of real estate firms to buy new land in this country. Some troubled Chinese real estate companies, such as China Evergrande Group and Shimao Group Holdings, were also forced to sell valuable properties to deal with liquidity problems.

Therefore, real estate firms in Hong Kong have taken advantage of this opportunity to increase investment in China. It shows the financial strength of Hong Kong companies, and marks a reversal, when before, Chinese real estate firms were the only group to invest in Hong Kong. For example, just over a year ago, Kaisa Group was considered a bright player in the city’s real estate market. But by December, they had to sell off many assets and fall into default.

“Hong Kong property developers are taking advantage of the downturn in the Chinese market. However, they are also cautious about choosing only high-quality projects with long-term potential,” said Michael Wu, an analyst. Senior analyst at Morningstar Investment Service said.

New World Development – one of Hong Kong’s leading real estate firms – is betting big on the Greater Bay Area, which includes Hong Kong and Guangdong province. China’s implementation of a “three red lines” policy to curb debt financing by real estate firms has created this opportunity, CEO Andrian Cheng said.

“New World can buy land very cheaply and with high profitability during this crisis,” Cheng said in late February. “This is what we call a flash victory.”

Many other companies are also exploring the investment. Swire Properties has set aside HK$50 billion ($6.4 billion) to pour into China over the next decade. Hang Lung Properties vice president Adriel Chan said in January that companies with low debt levels like Hang Lung have more opportunities in the Chinese market.

Actively pouring money into the mainland will help Hong Kong real estate firms have more growth channels when the Hong Kong market is saturated and the authorities pay more attention to affordability, while allocating more land to customers. social housing.

In China, the withdrawal of real estate firms caught up in government auctions has sent land prices down. The average price in February fell to its lowest level since 2019, at 1,905 yuan ($300) a square meter, according to research firm China Real Estate Information.

According to Philip Tse, director of real estate research for Hong Kong and China at Bocom International Holdings, Hong Kong companies may be attracted by commercial real estate projects in first-class cities and China’s second tier. This is an area where they have an advantage in terms of branding and governance.

The situation in the residential property market is the opposite, said Patrick Wong, a real estate analyst at Bloomberg Intelligence. “The competition in the Chinese real estate market is very tough. Policy risks are also there. Regulations are sometimes loosened, sometimes tightened,” explained Wong, “If the market cools down when the project is completed If it’s successful, home sales will slow down. So it’s quite challenging.”

Ha Thu (according to Bloomberg)