Hong Kong Property Prices to Drop: Hang Lung Chairman
With growing uncertainty surrounding Hong Kong's property market, one of the territory's biggest property developers is joining the chorus of voices predicting a drop in real estate prices.
"Every market tanks; what doesn't change is cycles," Ronnie Chan, Chaiman of Hong Kong's third-largest developer Hang Lung Properties told CNBC on Monday. "Each time the reason may be different, but (prices) will come down."
Hong Kong's property prices surged 20 percent in 2010 and 30 percent the year before, prompting authorities to introduce measures to cool the market. Analysts have been predicting it's just a matter of time before the boom comes to an end. Barclays Capital, for one, expects prices to fall as much as 20 percent next year, but not before increasing some 15 percent this year.
Chan said he has avoided buying land in Hong Kong for the last decade because the market has been too frothy but he was ready to buy once prices dropped.
"The only time when Hang Lung buys is when nobody else is buying," Chan said. "We will buy in time when the market tanks...in that sense, you don't want to see Hang Lung buying, that means there is blood on the street."
Hang Lung Properties reported a nearly 60 percent drop in underlying profits for the year-ended June 30th on Monday and cited its decision to delay selling completed residential projects for the decline.
The company though has been very active in the mainland market, which it entered in 1992. It already has four shopping malls in China and is planning to open seven more mall-based projects in second-tier cities.
But Chan said he thinks China's property market is also due for a correction. "The government is very keen to bring down property prices, it is a matter of social necessity in order to maintain harmony," he said. "Personal guess, the government will keep at it until prices stabilize."
Chan said the Chinese government's push to build affordable homes, would lead to lower margins for property developers, driving more of them into commercial property development. But he warned that many of these companies lacked the experience to handle large commercial projects.
"They think that if you can play basketball you can also do gymnastics, which is not true...it doesn't prevent them from trying," he said. "I think a lot of them will lose for sure, or at least they will build really what I call trash commercial properties, and so China will be full of cities that is full of trash buildings."