Walter Kwok: Hong Kong Property Market Is Peaking20 June, 2011, 23:47. Posted by Zarathustra
Tags: Big Swing Dick, Hong Kong, Property, Real Estate
Walter Kwok, the non-executive director of Sun Hung Kai Properties (16.HK), told media in Chongqing that property market in Hong Kong is at its peak.
He told journalists that the disappointing land auction of Borrett Road site is a signal that the property market will cool. As a reminder, the market expected that the site would be sold at a new record high, yet it hugely disappointed both in terms of price and the overall atmosphere of the bidding. Walter Kwok added that he “won’t be surprised if property prices fall 10-15%, because the market is peaking”. He also believes that most people have wrongly blamed Chinese buyers for driving property prices in Hong Kong higher, and the recent move to tighten mortgages for foreign buyers has done nothing to deal with the root cause, in his view.
While there is one bearish folk here, Li Ka-shing’s Cheung Kong (1.HK) continues to buy land. It has just bought a site in Hung Hom for HK$801 million. The site can provide 104,841 sq. ft. GFA, implying an accommodation value of HK$7,640 per sq. ft. The site is limited for building small flats only in order to meet the demand of first-time buyers, although it is not clear how a site being bought at such a price can be used to build something which will be affordable for first-time buyers (unless Cheung Kong sells the flats at loss).
Of course, one should be reminded once again of the enormous strength of Cheung Kong’s balance sheet, which makes all recent acquisitions very manageable financially. No one should expect any problems for Cheung Kong even the property market corrects significantly.
My current forecast for the Hong Kong property market is in-line with Walter Kwok’s judgment that 10-15% correction will be likely as the global macro risks are on the rise and the perceived policy risks has increased. Again, if the global macroeconomic outlook deteriorates in the coming months, I will be prepared to further lower my property market forecast.