Hong Kong Property: Which Real Estate Companies were hurt most?

The measure announced last week by the government to curb home prices certainly caught the market by surprise, with buyer/sellers/speculators all in limbo for a week or so. Property companies stocks were hurt, certainly.

The new policy was more geared towards curbing home prices, which have provoked all sorts of public criticisms towards the government that it is not doing enough. Naturally the property companies which should be hurt most would be property developers which focus on building and selling homes, while commercial properties landlords should be relatively unscathed.

Or are they?

I looked at the latest full-year result of major properties companies to give you a very rough idea on how exposed they are to the residential market. Although many of them have exposure to China markets, I did not attempt to separate China from Hong Kong as both residential markets are under increasing policy risks. There are some rough estimations and adjustment, and include some guesswork. The list is sorted by the one-week share performances.

So even though the policy was geared towards curbing residential housing prices, the share prices performance for the week seemed to be rather random. This is by no means a scientific or perfect measures, but to give a sense on what was going on with the property stocks after the surprise policy.

Note:

1. In Hong Kong, property development is basically selling residential units. Usually property companies in Hong Kong do not tend to sell commercial properties, so property development profit is a good proxy for exposure to residential market.

2. Half of the bottom-line of Cheung Kong (1 HK) comes from its associate Hutchison Whampoa (13 HK). The figure above has not taken Hutchison Whampoa into account for simplicity sake.

3. For Henderson Land (12 HK), they booked the profits from the sales of 24 units at the controversial 39 Conduit Road projects, and it only emerged later that 20 out of 24 of the sales were not completed and cancelled. I roughly deduct the amount from the last year number.

4. I excluded the property developments profits from Hang Lung Properties (101 HK). The company has an inventory of more than 1,000 flats at the Long Beach Project and the HarbourSide Project, which they have held for years, trying to time the best occasion to sell. Besides these, the company is essentially a commercial properties landlord, with aggressive expansion plan in China.

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About Zarathustra

Zarathustra: Founder and Managing Editor of Also sprach Analyst. Once an analyst, now an investor and entrepreneur. Based in Hong Kong, but Londoner at heart.