Chinese developers have been slowing their land buying in Hong Kong, joining their local counterparts in sitting out a slump in the property market.
Bloomberg is reporting that mainland developers who outbid their Hong Kong rivals in several residential land sales in recent years participated in only two out of eight tenders this year.
That compares with Chinese developers including China Vanke Co. Ltd. and Poly Property Group Co. bidding in all but one of the nine tenders in the previous six months, the data show.
The tepid demand from Chinese buyers adds to market headwinds as prices have dropped 12 percent from a September peak, homes sales have ground to the slowest on record and land prices in government sales have slumped.
The pullback from mainland developers, on top of weak appetite from Hong Kong firms including Sun Hung Kai Properties Ltd. and Cheung Kong Property Holdings Ltd., will further damp property prices, especially outside of prime areas in the city’s central district, analysts said.
“Land prices are currently under downward adjustment, especially for land in the New Territories,” said Thomas Lam, head of valuation and consultancy in Hong Kong at Knight Frank LLP.
“In the short term, it will affect the second-hand market in that area.”
Land prices in Hong Kong’s New Territories, where developers are releasing most of the new housing, have fallen 10 percent to 15 percent in the first half, Lam said, and could drop another 5 percent in the second half.
Jones Lang LaSalle Inc. said in a report on July 7 that the winning bids on five of the eight residential land tenders came in below the low end of market expectations, with prices in select districts falling as much as 20 percent in the past 12 months.
Pressure on prices is likely to intensify as the government sells more land to make property more affordable.
On June 29, it announced it will put out seven new plots of land for tender in the July to September fiscal quarter, with a capacity to increase the supply of residential flats by 4,760.
Land prices will fall even faster than home prices, Secretary for Development Paul Chan said in June.
“The continuing decline in residential property prices has led PRC developers to take a breather from the land sales, to reassess market conditions,” Denis Ma, head of Hong Kong research at Jones Lang LaSalle, wrote in an e-mail.
“Whether they will be as aggressive as beforehand, however remains to be seen.”
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