22 October 2016
TW6 project near Tsuen Wan West Station is one of the major investments of Vanke’s Hong Kong unit. Photo: HKEJ
TW6 project near Tsuen Wan West Station is one of the major investments of Vanke’s Hong Kong unit. Photo: HKEJ

Why Chinese developers are seeking to expand in HK

Hongkongers may be wary of many things associated with China, but they have no choice really but to accept the growing influence of mainland entities in the city.

After grappling with various things in recent years, locals may soon find that they’ll have to deal with the Chinese even when making one of the biggest decisions in life — buying a home.

A number of mainland developers were among 24 firms that have submitted letters of intent to develop a site in Tseung Kwan O. The list includes Vanke (02202.HK) and China Overseas Land & Investment (00688.HK).

Despite the recent cooling of the property market, a senior executive of Vanke told Hong Kong Commercial Daily they are not worried about the project’s prospects.

Mainland firms’ involvement in local property development is not new, but their presence is getting more noticeable.

While demand from Chinese buyers for local residential properties has abated since the introduction of a number of restrictive policies in 2012, mainland developers’ interest has however been on the rise, property consultant JLL said in a report.

“In 2015, mainland developers bid on over half of all residential land sales tendered by the government, winning about 25 percent of awarded tenders,” elbowing aside entrenched Hong Kong developers, the report noted.

Mainland bidders also tended to be more aggressive. Their bid prices exceeded market expectations in 73 percent of cases between 2013 and 2105, compared with 59 percent for local real estate firms, the JLL report pointed out.

Falling margins in their home turf, a desire to lift their brand image and the plan to use Hong Kong as a springboard for overseas expansion are some of the possible reasons behind their growing participation in the local market.

In the next few years, about one in ten new families opting to buy a home from a new project could end up living in properties developed by mainland companies, JLL predicts.

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EJ Insight writer

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