Mainland property developers have flooded into Hong Kong in recent years. But they may be learning a bitter lesson as the housing market turns weaker.
Country Garden Holdings (02007.HK), China’s largest developer by sales, is one of the mainland developers struggling with their Hong Kong projects.
Amid the lackluster market sentiment, several new projects in the New Territories have attracted thin interest from buyers despite reasonable pricing.
Country Garden last week offered the first batch of 110 flats from its Altissimo project in Ma On Shan at HK$16,497 per square foot. Though the price was considered low by fellow developers, demand was still far from strong. The developer announced a further discount of 7 percent on Wednesday.
Factoring in the discount, the net offer price would be around HK$15,300 per square foot. Considering the land cost of HK$10,500, Country Garden would be happy to come up with even a small profit.
The company acquired 60 percent of the Ma On Shan site in September 2017. At the end of 2014, the plot was auctioned off at just HK$5,500 per square foot.
Following a big surge in land prices, Country Garden came in a bit overly aggressive. At the time, secondary housing price in the district was around HK$14,000. The small gap suggests Country Garden must have held a fairly bullish view of the local property market.
The company’s other project in Kowloon City could turn out to be an even bigger headache.
It’s interesting to note that the selling side of these land plots were all Hong Kong players. No wonder the property business is often said to require deep local knowledge.
The full article appeared in the Hong Kong Economic Journal on Nov 23
Translation by Julie Zhu
[Chinese version 中文版]
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