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Thread: Hong Kong's new metropolis unlikely to tame home prices for now

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    Default Hong Kong's new metropolis unlikely to tame home prices for now

    Hong Kong's new metropolis unlikely to tame home prices for now

    Oct 08, 2021



    (BLOOMBERG) HONG Kong's latest ambitious policies to increase land supply are unlikely to make a dent in the city's home prices for now.

    That's the conclusion of analysts after Chief Executive Carrie Lam on Wednesday (Oct 6) proposed a slew of measures to boost the number of homes in the world's most expensive residential market. They include an aggressive target to turn the remote northern part of the city into a "metropolis" for 2.5 million people - a project that's likely to take decades to come to fruition.

    "It isn't something that can happen instantly," said Patrick Wong, a property analyst with Bloomberg Intelligence. He estimates Hong Kong's home values will rise between 5 per cent and 10 per cent this year.

    In the last annual policy address of her current term, Lam announced plans to transform the northern part of the New Territories - relatively underdeveloped compared to Hong Kong Island and Kowloon - into the next residential and commercial hub spanning 300 square kilometres.

    That's 27 per cent of Hong Kong's total area and about two-fifths the size of New York City. Lam has faced growing pressure from China to address Hong Kong's housing shortage, which Beijing blames for the discontent that led to widespread anti-government protests in 2019. Her planned project in the northern area bordering Guangdong province is also intended to deepen ties with the mainland.

    The government will identify more land plots in the north to provide as many as 186,000 additional homes, taking the total to 926,000 including existing properties and those already planned, Lam said.

    While she didn't give a definite time frame, the chief executive noted that the metropolis "is the most vibrant area where urban development and major population growth of Hong Kong in the next 20 years will take place".

    Major Hong Kong developers could boost new-home sales as the city leader's annual policy address avoided property cooling curbs, which could support demand and new home-price highs.

    However potential projects from new land supply in the so-called northern metropolis announced by Lam may take at least a decade to fully execute.

    In a bid to tackle excessive red tape, Lam also proposed initiatives to streamline the development process, obtain land from indigenous villagers and make redevelopment of old buildings easier for developers.

    "The policy address focuses on the medium- to long-term planning," said Willy Liu, chief executive of Ricacorp Properties, a realtor. "There isn't any measure that targets the property market in the short term, therefore it won't have much impact on the property market and prices in the next few years."

    The focus on increasing land supply instead of implementing property cooling measures such as raising taxes is positive news for Hong Kong's property giants.

    The city's so-called Big Four developers - Henderson Land Development, New World Development, Sun Hung Kai Properties and CK Asset Holdings - all have large land resources in the northern area.

    "Developers still have a lot of farmlands which can be converted" and sold, Raymond Cheng, head of China and Hong Kong research at CGS-CIMB Securities, wrote in a note on the policy address. Henderson Land and Sun Hung Kai in particular have large holdings and are good at converting them, he added.

    The Hang Seng Properties Index climbed as much as 3 per cent on Thursday morning. Henderson Land jumped 7.2 per cent, and Sun Hung Kai rose 3.8 per cent.

    China's crackdown on the property industry as part of President Xi Jinping's goal to ensure homes are for living and not speculation has raised questions over whether Hong Kong developers might also be targeted.

    In July, China's top official to Hong Kong, Xia Baolong, set a goal for the city to eliminate its notoriously small homes by 2049.

    Home prices in the private market reached a record high in August, shattering hopes among younger Hong Kong citizens that an economic downturn could make ownership easier. Even for those who can't afford to buy a home, it takes almost six years for an applicant to be assigned a government-subsidised rental apartment.

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    Default Re: Hong Kong's new metropolis unlikely to tame home prices for now

    Hong Kong developers surge on Lam's northern metropolis plans

    Oct 07, 2021

    [HONG KONG] Hong Kong Chief Executive Carrie Lam's plans for a new metropolis in northern Hong Kong came as a big relief to investors in the city's property giants.

    Shares of major developers including Henderson Land Development jumped a day after Ms Lam unveiled her target to turn the remote northern part of the New Territories into an urban area for 2.5 million residents.

    Investors are betting that the move - aimed at alleviating Hong Kong's housing crisis - will benefit developers who hold large tracts of land in the area. They are also cheered by the absence from her address of any measures to cool the property market, such as higher taxes.

    That lifts a cloud following speculation that China's government may put more pressure on the real estate tycoons to solve the city's housing woes.

    "Developers that now have the most agricultural land on hand will benefit the most under this policy address," said Philip Tse, director and head of Hong Kong and China property research at Bocom International Holdings. "The market is reacting on both: policy overhang pressure is lower and there's potential for more business for them."

    The Hang Seng Properties Index rose 2.1 per cent as at 1.38 pm on Thursday, paring this year's decline to about 5 per cent.

    Henderson Land jumped 6.2 per cent, the most in two years. Sun Hung Kai Properties and New World Development climbed more than 3 per cent, and CK Asset Holdings rose 2.5 per cent.

    The project can create value for builders that have more land holdings in the area, when they develop it into homes or sell it to the government, according to analyst Kenny Ng.

    "The market initially was worried that housing supply would drastically rise in the short term after the policy address, but the policies turned out to be relatively gentle," said Mr Ng, a securities strategist at Everbright Sun Hung Kai Ltd. "This alleviated the market's concerns, thus benefiting shares of property developers."

    Real estate firms will also be cushioned by the likelihood that the plan will not tame Hong Kong's sky-high home prices for now. "It isn't something that can happen instantly," said Patrick Wong, a property analyst with Bloomberg Intelligence. He estimates Hong Kong's home values will rise between 5 per cent and 10 per cent this year.

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