Credit Suisse expects HK$734m charge from failed luxury home sales

(HONG KONG) Henderson Land Development Co, controlled by billionaire Lee Shau-kee, will probably report lower first-half profit today after a HK$734 million (S$128 million) charge from 20 failed luxury apartment sales.

Profit, excluding revaluation gains, may decline to HK$1.71 billion for the six months to June 30 from HK$2.11 billion a year earlier, Credit Suisse Group AG Hong Kong-based analyst Cusson Leung said in an interview.

He derived both figures from Henderson’s earnings last year as the company changed its financial year to December from June in 2009.

The developer, Hong Kong’s fifth biggest by value, in June said that HK$2.67 billion worth of sales at its 39 Conduit Road project had fallen through, sparking a probe by the authorities and prompting the government to order developers to improve sales tactics and better disclose transactions.

The company has denied any wrongdoing and Mr Lee, 82, hasn’t spoken publicly since.

‘First-half earnings will mainly be about profits from the sale of inventories at various projects,’ said Mr Leung, who has a ‘neutral’ rating on the stock and forecasts that it would rise to HK$52.60 over 12 months. ‘We’ll look out for their expectation of second- half sales.’

Henderson’s shares have fallen 19 per cent this year, the worst performer in the seven-member Hang Seng Property Index, which declined 4.3 per cent during the period.

Henderson fell 0.4 per cent to HK$47.25 at the 4pm close yesterday.

Henderson said this month that it sold two houses at a Headland Road luxury project in the Island South district for more than HK$1 billion in total.

It also restarted sales at 39 Conduit Road, with one apartment being offered for HK$186 million. The units are not part of the collapsed sales.

‘The prices achieved at Headland Road are somewhat out of our expectation’ given current market conditions, said Mr Leung. ‘Investors will also pay attention to sales at 39 Conduit Road as these will be the main contributors for second-half profit.’

The city’s government this month raised downpayment ratios and said that it would increase land supply to curb a 45 per cent jump in housing prices since the start of 2009.

Four days after the announcement, Cheung Kong (Holdings) Ltd, controlled by Li Ka-shing, Hong Kong’s richest man, paid more than estimated for two building sites in a government auction.

Henderson will book profits in the first half from projects including 39 Conduit Road, Green Lodge and 8 Royal Green, Raymond Ngai, a Hong Kong- based analyst at JPMorgan Chase & Co, said in an Aug 23 report.

The company may book three units sold at 39 Conduit Road during the period to rake in HK$349 million in revenue.

The developer will report underlying profit of HK$1.3 billion, down 39 per cent from a year earlier, according to Mr Ngai. Excluding charges from the failed sales, profit may rise 4 per cent from 2009 to HK$2 billion, he said.

One of the sales that fell through was an apartment Henderson said it was selling for a world-record HK$88,000 a square foot.

Hong Kong developers sell apartments as they’re being built and book profits upon completion.

Police seized documents from Henderson last month as part of its investigation into the failed sales.

The developer has repeatedly denied any wrongdoing in the way it handled the transactions as the government has sought details on the sale agreements at the project in the Mid-Levels district on Hong Kong Island.

The company declined to attend a July 12 special session in parliament, called by lawmakers to discuss the transactions.

Founded by Mr Lee in 1973, Henderson has been buying land outside of government auctions, the main source of development plots in Hong Kong, to build a 40 million-square-foot landbank in the rural New Territories, the most among local developers.

Henderson plans to build 45,000 units across the city, most of them small to medium size, Mr Lee said on June 1 without giving a time frame.

‘The main thing to watch for is an update on its purchase of old buildings for redevelopments and farmland conversion, said Mr Ngai.

Mr Lee, with a fortune that Forbes magazine estimated at US$18.5 billion in March, is Hong Kong’s second-richest man.

The developer’s landmark properties include the International Financial Center, co-developed with Sun Hung Kai Properties Ltd, and luxury residential projects such as the Grand Promenade in the Eastern district of Hong Kong Island and the Grand Waterfront in East Kowloon.

Among major developers, Cheung Kong and Hang Lung Properties Ltd have reported earnings. Sun Hung Kai, the world’s biggest builder by market value, will post full-year earnings on Sept 20. — Bloomberg

Source: Business Times, 26 Aug 2010

(HONG KONG) Developers fell in Hong Kong trading after the government tightened mortgage lending rules and said it will increase the supply of land to help cool surging home prices.

Sun Hung Kai Properties Ltd, the world’s biggest builder by market value, dropped 4.1 per cent to HK$110 at the 4pm close of trading, its biggest decline since May 25. Cheung Kong Holdings Ltd, controlled by Hong Kong’s richest man Li Ka-shing, declined 2.3 per cent.

Property transactions in some of the city’s largest residential complexes slumped by more than half over the weekend, according to Centaline Property Agency Ltd. Financial Secretary John Tsang said the government won’t hesitate to introduce further measures if necessary, after saying on Aug 13 that home prices are approaching the level of 1997, the height of a previous bubble that was followed by a six-year slump.

The measures ‘will hurt sentiment on property stocks,’ JPMorgan & Chase Co analysts Raymond Ngai and Ryan Li wrote in a note yesterday. ‘The market will require a bigger discount for developers on concerns of property bubbles and ongoing policy measures.’

The government has been seeking to rein in home prices that have soared about 45 per cent since the beginning of 2009, boosted by mortgage rates at the lowest in two decades and buying by mainland Chinese.

Henderson Land Development Co, the developer controlled by billionaire Lee Shau-kee, declined 3.2 per cent to HK$48.45. Sino Land Co dropped 5.7 per cent to HK$13.28, the biggest loser among the seven-member Hang Seng Property Index. The gauge fell 2.6 per cent yesterday, bringing its loss this year to 3.9 per cent.

Down payments for apartments costing HK$12 million (S$2.1 million) or more will rise to 40 per cent, from 30 per cent, with immediate effect, Hong Kong Monetary Authority chief executive Norman Chan said on Friday. The government will increase land sales next year, Mr Tsang said.

‘The basket of measures will have the effect of stabilising prices,’ said Buggle Lau, chief analyst at property agency Midland Holdings Ltd.

Weekend transactions of used apartments at 10 of Hong Kong’s biggest private residential complexes fell 53.5 per cent from a week earlier to 32, Centaline, one of the city’s largest real estate agencies, said.

‘The demand-side measures should have an immediate impact on the market,’ Mirae Asset Management Ltd analysts Keith Yeung and Stephanie Lau wrote in a report. ‘Speculative activities will come down sharply and developers’ premium pricing capability is likely to be affected.’ Home prices will fall 10 per cent, and Sun Hung Kai and Sino Land are the ‘most vulnerable’ developers because they bought ‘expensive parcels of land,’ according to the Mirae analysts.

Sun Hung Kai on June 8 paid HK$10.9 billion for a residential site in the Ho Man Tin district. The price, which beat a Bloomberg News estimate by 30 per cent, is the highest paid in a government auction in urban Hong Kong since the market peaked in 1997.

Sino Land, one of the biggest commercial landlords in the Tsim Sha Tsui district, and K Wah International Holdings Ltd in December bought two residential sites for HK$10.4 billion in what was then the city’s biggest land auction in almost two years.

Last week’s measures came as Hong Kong’s economy expanded a more-than-estimated 6.5 per cent in the second quarter, according to a government report last week, topping the 6.3 per cent median forecast of 13 economists in a Bloomberg survey. Hong Kong’s economy will grow between 5 per cent and 6 per cent for the full year, the government said, revising up a previous forecast.

For properties worth HK$12 million or less, the maximum loan amount will be capped at HK$7.2 million, meaning down payments will increase for any property valued above HK$10.3 million. Luxury homes in the city are defined as those costing at least HK$10 million, or bigger than 1,000 square feet.

Down payments for investment properties will rise to 40 per cent from 30 per cent, Mr Chan said.

Since the early 1990s, Hong Kong banks have been restricted from lending more than 70 per cent of the purchase price of a home, to reduce the risk of loan losses from a market crash. To help the market recover from the 1998 crash, buyers were subsequently allowed to borrow a further 15 per cent of their home’s value as long as they obtained mortgage insurance, a move that increased affordability while limiting risk for banks.

The market has already been cooling, with new mortgage approvals declining to HK$35.4 billion in June, down 6.2 per cent from May, according to HKMA data. Some 0.03 per cent of mortgage loans were delinquent, while only 310 owners in the city owe more on their homes than their properties are worth.

‘Our house view on property developers is ‘cautious’ because the government is determined to curb the overheating real-estate market,’ said Steve Tse, a research manager at BEA Union Investment Management. ‘They don’t want a bubble, and they want to get it under control.’ – Bloomberg

Source: Business Times, 17 Aug 2010

(Hong Kong) HONG Kong billionaire Lee Shau-kee’s Henderson Land Development Co plans to sell 10 new apartments at the luxury development where the cancellation of sales worth HK$2.67 billion (S$466.9 million) sparked an investigation by authorities.

The builder held a briefing with real estate agents on Thursday to start marketing the 10 units at 39 Conduit Road, spokeswoman Bonnie Ngan said in a phone interview yesterday. The units were not part of the 20 collapsed sales, she added.

‘It shows that the developer is quite optimistic about where the luxury property market is heading,’ said Patrick Chow, head of research at Ricacorp Properties Ltd, a local real estate brokerage. ‘I don’t think they would’ve put it out to the market if they don’t have lots of confidence they’ll be able to sell them at these prices. It would look very bad for them if they have to lower prices or even withdraw them.’

Hong Kong’s fifth-biggest builder by market value is under government and police investigation after it said in June that 20 of 24 luxury flats it had expected to sell at the development had been cancelled. The company has denied any wrongdoing, and police and government officials have declined to comment on their probes.

The developer is aiming to sell the 10 flats that are priced at as much as about HK$186 million as home prices in the city are expected to increase with interest rates at two-decade lows and demand for the city’s high-end properties from mainland buyers.

The value of Hong Kong luxury homes may climb 10 per cent in the second half on record-low mortgage rates and strong economic growth, according to Jones Lang LaSalle Inc.

Henderson’s shares dropped one per cent to HK$50.05 at the 4pm close of trading in Hong Kong. The stock is down 14 per cent this year. The seven-member Hang Seng Property Index, which includes Henderson, fell 1.3 per cent in 2010.

The city’s overall property prices surged more than 40 per cent since the beginning of last year, according to the Centa-City Leading Index, a weekly measure developed by Centaline Property Agency Ltd and City University of Hong Kong.

Hong Kong’s Commercial Crime Bureau took documents from Henderson’s offices a month ago as part of the investigation.

Henderson said it will take a charge of HK$734 million against earnings from the cancelled sales.

The builder said in October one of the flats was selling for as much as a record HK$88,000 a square foot.

The 10 new apartments range in size from 2,808 square feet to 3,533 square feet, according to a price list on the development’s website.

The cheapest is listed at HK$81 million and the most expensive at HK$186 million. — Bloomberg

Source: Business Times, 14 Aug 2010

(Hong Kong) THE Hong Kong government tightened mortgage lending yesterday for bigger flats as their prices head for historic highs, fuelling asset bubbles in the Chinese territory.

Property shares will likely feel pressure next week on the news, after late losses pushed the Hang Seng index to its worst weekly performance since early July.

Hong Kong, home to property tycoons such as Li Ka-shing and Lee Shau-kee, faces overheating in its real estate sector, driven by record-low interest rates, abundant liquidity partly due to mainland Chinese buying and Asia’s strong economy.

‘We need to take preventive measures before an asset bubble forms,’ Hong Kong Financial Secretary John Tsang told a news conference after the government announced economic data.

‘Experience indicates when the property market heats up, a lot of speculation takes place in the market,’ he said. ‘I will not hesitate to introduce further measures if necessary.’

In a separate news conference, the Hong Kong Monetary Authority announced tighter rules for lending, lowering the mortgage loan ceiling to 60 per cent from 70 per cent for properties with transaction prices of HK$12 million (S$2.1 million) or above.

Previously, mass-market apartments usually had a higher loan ceiling of 70 per cent, while luxury apartments are categorised as those that cost HK$20 million or more.

The government will also raise the forfeit of deposits for buyers who cancel apartment transactions to 10 per cent, up from 5 per cent, to discourage speculators.

While trying to increase the housing supply, the government has also set a limit on debt servicing ratios of mortgage applicants to 50 per cent, rather than the current 50-60 per cent. ‘This is quite a powerful move to clamp down speculation in the property market,’ said Alva To, head of consulting for North Asia at property services firm DTZ. The latest moves will likely dampen sentiment in the stock market next week.

‘That is going to have a bit of pressure on the share prices, but not by too much. Actually if you look at the share prices, they have not performed that well if you compare that to the physical market,’ Eva Lee, an analyst at Macquarie Securities.

Housing prices have risen by another 10 per cent since the start of 2010, after gaining about a third last year. Property stocks fell 1.3 per cent since the beginning of this year.

Mr Tsang said prices for large flats had surpassed previous highs of 1997 and were fast approaching historic highs.

Earlier this year, the government slapped a higher stamp duty on luxury apartments to try and rein in prices.

It is also increasing scrutiny of Hong Kong property developers such as Henderson Land Development Co Ltd, which was investigated by police after announced sales of several units at one of its luxury apartment developments ultimately failed to close. — Reuters

Source: Business Times, 14 Aug 2010

(HONG KONG) Hang Lung Properties Ltd, the best performer in the Hang Seng Property Index this year, said full-year profit excluding gains from revaluations more than doubled after it sold more apartments in Hong Kong.

Net income excluding revaluation gains and deferred tax rose to HK$6.67 billion (S$1.2 billion) in the 12 months to June 30 from HK$2.39 billion a year earlier, the developer said in a statement to the Hong Kong stock exchange yesterday. That fell short of the average estimate of HK$6.96 billion from 12 analysts surveyed by Bloomberg.

Hong Kong’s third-biggest developer by market value said full-year property sales jumped after it sold more luxury apartments at its HarbourSide project. Hong Kong home prices have risen 38 per cent since early 2009, fuelled by record-low mortgage costs, near-zero interest rates on savings deposits and buying by rich mainland Chinese.

Luxury home prices in the city may rise 10 per cent by the end of this year after already gaining 10 per cent in the first half, property consultant Jones Lang LaSalle Inc said last week.

‘I’m optimistic about Hong Kong’s luxury market in the long run,’ Hang Lung chairman Ronnie Chan said at a press briefing yesterday.

The company sold 425 garden-view units at the HarbourSide development in West Kowloon and recorded profit from property sales of HK$5.26 billion, compared with HK$3 million a year earlier.

The shares fell 3.1 per cent to HK$32.60 at the 4pm close in Hong Kong, while the Hang Seng Property Index lost one per cent. The stock is up 6.5 per cent this year compared with a 3.6 per cent decline in the seven-member property index.

Hang Lung, which has two office and shopping mall complexes in Shanghai and one in Shenyang and is building several others in cities such as Wuxi and Jinan, said projects in China are progressing ‘well’.

Rental profit from mainland China rose 14 per cent to HK$1.6 billion, it said.

The developer is seeking to buy more prime sites in China, according to yesterday’s statement.

‘We’ll stay focused on mainland China’s high-end commercial leasing properties, and focus primarily on second-tier cities, which generate returns as good as the first-tier cities,’ Mr Chan said. ‘China’s system is flooded with money.’

Rental profit from its Hong Kong investment properties was little changed at HK$2.1 billion. Hang Lung owns the Hong Kong headquarters of Standard Chartered plc.

Hang Lung also booked a HK$21.2 billion gain reflecting the increased value of real estate held for investment, against a HK$3.5 billion gain the same period the previous year.

Including those gains, net income for the year surged more than 400 per cent to HK$22.3 billion, or HK$5.30 a share, from HK$4.13 billion, or 99 Hong Kong cents a share, a year earlier.

The company is the first of the city’s biggest builders to announce earnings. Cheung Kong (Holdings) Ltd, Hong Kong’s second-biggest developer controlled by billionaire Li Ka-shing, will report on Aug 5. Sun Hung Kai Properties Ltd, the city’s biggest developer, and Sino Land Co will likely report next month.

Hang Lung will pay a final dividend of 54 Hong Kong cents, from 51 cents last year. — Bloomberg

Source: Business Times, 29 Jul 2010

Auction atmosphere not as good as expected, with no aggressive bidding

(HONG KONG) Nan Fung Development Ltd and Wharf (Holdings) Ltd bid HK$10.4 billion (S$1.85 billion) for a building site in Hong Kong’s Peak district yesterday at an auction that was close to surveyors’ estimates.

The price for the Mt Nicholson Road site in one of the city’s most exclusive residential areas was lower than the HK$10.5 billion median estimate of seven analysts in a Bloomberg News survey.

Their forecasts ranged from HK$8.9 billion to HK$11.5 billion, or HK$27,000 to HK$35,000 per square foot of gross floor area.

The government has been trying to curb a 38 per cent surge in home prices since the beginning of 2009 amid concerns housing is out of reach of ordinary residents. The Hang Seng Property Index turned lower after the auction result, ending down one per cent at the 4 pm close in Hong Kong.

‘The market is worried we’re going to have a bubble burst again like after 1997,’ when the market peaked, said Trevor Cheung, an analyst at BNP Paribas in Hong Kong.

Hong Kong’s luxury home prices have been fuelled by record-low mortgage costs, near-zero interest rates on saving deposits and buying by mainland Chinese. The city’s home prices have gained 9.6 per cent this year and last week rose to the highest since 1997, according to Centaline in a July 23 report.

Luxury home prices may rise another 10 per cent in the second half if interest rates stay at two-decade lows and the local economy keeps growing, property consultant Jones Lang LaSalle said this month.

Nan Fung, a privately held developer, and Wharf will develop the site in a 50-50 venture, said Donald Choi, managing director at Nan Fung, after the auction. Wharf owns two of Hong Kong’s largest shopping centres and the city’s cable TV operator.

The site at 103 Mt Nicholson Road, formerly used for government staff quarters, has a total gross floor area of 324,861 square feet (30,180 square metres). The auction was initiated by the government, which has pledged to increase land supply as part of its measures to keep home prices in check.

About 30 per cent of the gross floor area at the plot will be used to build townhouses, while the rest will be used for apartments, Mr Choi said. At HK$10.5 billion, the developers paid HK$32,014 per square foot for gross floor area.

It is a ‘unique site in a very rare location’ and there are not that many sites at the Peak, Mr Choi said. He said the price was ‘reasonable.’ Martin Lee, the youngest son of Henderson Land billionaire chairman Lee Shau-kee, in May paid HK$1.82 billion, or a record HK$68,200 per square foot, for a site on Barker Road in the Peak district at an auction held by Jones Lang. Mr Lee said afterwards he would use the site to build houses for his family.

‘Hong Kong land prices are already so expensive,’ Hang Lung Properties Ltd chairman Ronnie Chan said at the company’s full-year earnings briefing as the auction elsewhere in the city got underway. ‘With that kind of price we can develop three or even four Hang Lung plazas in Shenyang’ in north-eastern China, he said, referring to estimates of about HK$10 billion for the Peak site.

Most government land sales in recent years have been triggered by developers who promised to pay minimum amounts for sites on a list of available plots under the so-called land application system. Regular government land auctions were halted in 2004 to support falling home prices.

Yesterday’s auction attracted four bidders, with only two vying for the site from HK$9 billion.

‘The atmosphere was not as good as we expected; there was no aggressive bidding at all,’ said Alnwick Chan, executive director at property consultant Knight Frank LLP.

‘The demand is there but the market is relatively small. There’s speculation that because there are three other sites coming up to auction catering to the middle to upper income groups, they’re saving their resources for that.’

The government will sell two sites in the Kowloon area at auction on Aug 17 and a residential plot in Kowloon Tong district on Aug 31.

Demand for luxury properties is being supported by a lack of new supply and an influx of mainland Chinese buyers, who account for about 20 per cent of local residential transactions this year, Ricky Poon, managing director for residential sales at Colliers International Ltd, said before the auction.

‘This is a normal price; for a luxury site, demand is always there because developers are not taking a lot of risks,’ said James Cheung, a director at the surveyor unit of Centaline Properties Ltd, one of the city’s biggest real estate agencies.

‘There will continue to be a healthy growth in Hong Kong’s property market.’ Nan Fung paid HK$3.42 billion in May for a site in the city’s Tung Chung area in the government’s first land auction in the fiscal year that started April 1. The price was a third less than surveyors’ estimates.

Sun Hung Kai Properties Ltd, the world’s biggest developer by market value, last month bought a site in the Ho Man Tin district for HK$10.9 billion. At HK$12,540 per square foot, it was the highest price paid in a government auction in urban Hong Kong since the market peaked in 1997. The gross floor area for the site is 869,000 square feet.

Luxury homes in Hong Kong are those at least 1,000 square feet or costing at least HK$10 million. — Bloomberg

Source: Business Times, 29 Jul 2010

Sale brings in HK$8b for firm, partners as demand stays strong

(HONG KONG) Sun Hung Kai Properties Ltd, the world’s biggest developer by market value, has sold 300 flats at an apartment project in Hong Kong’s Island South district over the past two weekends.

The sale at the Larvotto project has brought in a total of HK$8 billion (S$1.4 billion) in revenue for Sun Hung Kai and partners Kerry Properties Ltd and Paliburg Holdings Ltd, Victor Lui, an executive director at Sun Hung Kai’s agency arm, said in an e-mailed statement yesterday.

The developers will offer another 64 apartments for sale this week, Mr Lui said.

Demand for luxury homes in Hong Kong remains strong even as the government tries to curb a 38 per cent surge in home prices since the beginning of last year amid concerns that housing is becoming unaffordable.

Luxury property prices may rise 20 per cent this year on a lack of supply and low interest rates, property broker Jones Lang LaSalle Inc said in a report last week.

‘The atmosphere is very hot,’ said Louis Chan, managing director of residential sales at Centaline Property Agency Ltd.

‘There’s a lot of momentum in both new and used home markets.’

Apartments at Larvotto, which have been selling for an average of HK$30 million, will be around 1,500 square feet to 2,500 square feet.

Larvotto is the name of the main public beach in Monaco.

Larvotto has a total 715 units. Hong Kong developers sell units in developments in batches instead of offering them all at once, to gauge demand and take advantage of rising prices.

There were 86 used-home transactions at 10 of Hong Kong’s biggest private housing complexes over the weekend, little-changed from a week earlier, Mr Chan said. — Bloomberg

Source: Business Times, 27 Jul 2010

Sun Hung Kai may put up another 50 apartments for sale this week

(HONG KONG) Sun Hung Kai Properties Ltd, the world’s biggest developer by market value, will put another 50 luxury apartments up for sale in Hong Kong after buyers snapped up all 92 flats in a first batch put up for sale over the weekend.

The company sold the apartments at its Larvotto project at an average of about HK$40 million (S$7.1 million) per unit, bringing in about HK$4 billion in revenue, Sun Hung Kai said in a press release.

The new batch may go on sale in the middle of this week, it said, adding that their average sale prices may be 2 per cent higher.

‘The price is reasonable for properties of this quality,’ Eva Yeung, an agent at Centaline Property Agency Ltd who bought a HK$47 million unit on behalf of a Hong Kong-based client, said outside the project’s showroom at the International Financial Centre building in the Central business district on Saturday.

Ms Yeung said the luxury property market in Hong Kong will be supported by the lack of supply and increased demand from Chinese buyers. That may counter Hong Kong government efforts to curb a 38 per cent surge in home prices since the beginning of 2009 amid concerns that housing is becoming unaffordable.

About 20 per cent of the buyers over the weekend were from mainland China, Sun Hung Kai said.

‘Demand has exceeded supply,’ Victor Lui, an executive director at Sun Hung Kai’s agency arm, said in the press release. ‘All of the units were sold within the first few hours after sales began.’

Sun Hung Kai fell 0.3 per cent to HK$111.50 at the close of trading in Hong Kong yesterday. The Hang Seng Property Index that tracks the performance of seven Hong Kong developers dropped 0.4 per cent.

Sun Hung Kai and partners Kerry Properties Ltd and Paliburg Holdings Ltd last week said they were putting the apartments in the Ap Lei Chau district up for sale for between HK$15,811 per square foot and HK$22,500 psf, a record for the district.

Second-hand units in Bel-Air, a luxury project in the nearby Pokfulam district, are selling for ‘similar prices’ to Larvotto, according to Buggle Lau, chief analyst at property agency Midland Holdings Ltd. New developments in the area will probably sell at a minimum of HK$15,000 psf, he said.

Luxury residential prices in the Island South district, which includes Repulse Bay and Stanley areas, grew 2.5 per cent in the second quarter, after rising by nearly 35 per cent in the previous nine months, according to property consultant Knight Frank LLP.

Luxury homes are those at least 1,000 square feet (93 sq meters) or costing at least HK$10 million.

Apartments at Larvotto, which has 715 units, will be around 1,500 to 2,500 sq ft. Larvotto is the name of the main public beach in Monaco.

Hong Kong developers sell units in developments in batches instead of offering them all at once to gauge demand and take advantage of rising prices.

The authorities have introduced rules on new home sales and are investigating cancelled sales at a Henderson Land Development Co luxury apartment project.

Henderson last month cancelled 20 transactions at its project in the Mid-Levels district, including the one the company claimed would fetch a record HK$88,000 psf, prompting lawmakers to call for an investigation.

The Legislative Council on July 12 held its first special meeting to discuss the collapsed sales, which were worth HK$2.67 billion, according to Henderson.

Since last year Hong Kong has raised the requirement for downpayments on luxury homes and cracked down on misleading marketing by developers, including the use of show flats, after officials expressed concern that prices were rising too fast. – Bloomberg

Source: Business Times, 20 Jul 2010

Officers seize papers linked to deal on 20 luxury units, including ‘world’s priciest flat’

HONG KONG: Hong Kong police yesterday raided the headquarters of a major property developer embroiled in a controversy over the collapsed sale of what was billed as the world’s priciest flat.

Officers from the financial hub’s Commercial Crime Bureau swooped on Henderson Land Development’s office in Hong Kong’s financial district and took documents believed to be connected to the failed sale.

‘As a result of the execution of the search warrants, we have seized a quantity of documents, which will be investigated and looked into further,’ said Police Commissioner Tang King Shing.

‘Today, we also invited a number of people back to the commercial crime bureau to assist in our investigations. At this moment, the police have arrested no persons concerning this case,’ he added.

Henderson Land said it was cooperating with the authorities.

‘Our company has provided relevant documents and appointed staff to help in the investigation,’ the developer said in an e-mail statement in Chinese.

Inspectors also searched a law firm allegedly connected to the failed sale of luxury flats at the exclusive 39 Conduit Road towers in the city’s Mid-Levels residential area, local radio RTHK reported.

‘At this stage, it’s really hard to tell what’s going to come out from the investigation,’ said Professor Eddie Hui of the building and real estate department of Hong Kong Polytechnic University.

‘Even if the police took some documents from their office, it still does not mean they have committed any wrongdoing. We have to be careful in drawing any premature conclusions.’

Analysts said they expected the Hong Kong developer’s shares, which have lagged behind its peers, to come under pressure in the days ahead.

Last month, the Hong Kong government said it was looking into the cancelled sale of 20 multimillion-dollar flats developed by Henderson in Hong Kong, while legislators have been questioning the developer’s practices over the past few weeks.

The cancellations included a duplex unit that had fetched a global record price of HK$71,280 (S$12,695) per square foot last October. In the end, only four units were sold in that development, Henderson Land said.

Critics have demanded a probe, asking why the cancellations came to light only eight months after the announcement of the sales, which helped hike prices of the city’s luxury residential flats and stoked concerns about a property bubble in the former British colony.

Questions have also been raised about the relatively small deposit that Henderson kept after the failed sales, and why all the buyers appeared to have used the same law firm to process the transactions.

Henderson Land responded with advertisements in major newspapers saying the purchases were genuine and that the company was not connected with the buyers. It has said it will cooperate with the probe.

REUTERS, AGENCE FRANCE-PRESSE, BLOOMBERGS

Source: Straits Times, 15 Jul 2010

More transparency on developers’ sales tactics needed

(HONG KONG) The government should regulate Hong Kong developers’ sales tactics to increase transparency, a lawmaker said yesterday, as the territory’s Parliament held a special session on the collapse of HK$2.67 billion (S$474.89 million) of apartment sales by Henderson Land Development Co.

The Parliament held the meeting, which Henderson declined to attend, to discuss the 20 luxury apartment sales that fell through, prompting legislators’ calls for the government to investigate the transactions.

The government increased its scrutiny of developers after Henderson said in October that it sold an apartment at 39 Conduit Road in the Mid-Levels district on Hong Kong Island for a record HK$88,000 a square foot.

‘What’s happening is a failure of existing regulations,’ Wong Kwok-hing, chairman of the Legislative Council’s Housing Committee, said at the meeting to discuss the collapsed sales.

Henderson said in a press release its appearance in yesterday’s meeting would be ‘inappropriate’ because it has ‘sufficiently disclosed’ details on the transactions and an investigation is still under way.

The government, which is trying to curb a 38 per cent surge in home prices since the beginning of 2009, introduced in June nine rules on new home sales, including the use of show flats developers use to entice buyers before a building is completed. Those measures have no statutory power and are rules the Real Estate Developers Association ‘advise’ its members to follow, Mr Wong said.

Hong Kong’s government has sought details from Henderson, controlled by billionaire Lee Shau-kee, on the sale agreements after 20 of the 24 sales at 39 Conduit Road were cancelled.

Henderson has repeatedly denied any wrongdoing in the way it handled the transactions. Yesterday it said in a statement published in the South China Morning Post that ‘the company strongly rejects’ allegations that there have been irregularities in the sale of the apartments.

The government has submitted all the letters exchanged between Henderson and the Lands Department to the Legislative Council (Legco), Permanent Secretary for Transport and Housing Duncan Pescod told lawmakers yesterday. He and other government officials attending the meeting declined to comment on the investigations into the collapsed sales.

Hong Kong police and other law enforcement agencies are investigating the sales at 39 Conduit Road, Transport and Housing Secretary Eva Cheng told lawmakers during a July 5 Legco session. Ms Cheng declined to specify the other agencies and give a schedule for the investigation.

The lawmakers will meet again to discuss the sales, Mr Wong said, without giving a date. The meeting was attended by officials from the government’s Lands Department and Housing Authority.

‘Setting up legislations to regulate apartment sales would be unnecessary,’ said Patrick Chow, head of research at property agency Ricacorp Ltd in Hong Kong. ‘All we need is more clearly defined rules.’

Henderson shares rose 0.6 per cent to HK$47.50 at the close of trading in Hong Kong. — Bloomberg

Source: Business Times, 13 Jul 2010