Hong Kong’s politics could knock down developers

Swire Properties

27/09/2019 03:25

(The author is a Reuters Breakingviews columnist.  The opinions
expressed are his own.)
    By Christopher Beddor
    HONG KONG, Sept 27 (Reuters Breakingviews) - Property
developers in Hong Kong have plenty to fret about these days.
The city’s officials on Wednesday said they had rejected offers
for a plot of land at the former airport because bids did not
meet its reserve price, the latest sign that protests are
hitting real estate. But even more damaging over the long term
could be growing perceptions in Beijing that the property titans
are partly to blame for the unrest.
    The share prices of Sun Hung Kai Properties  0016.HK ,
Henderson Land Development  0012.HK  and New World Development
 0017.HK  – three of the city’s biggest property companies –
fell an average of 15% over the past three months, more than the
8% drop in the benchmark Hang Seng Index. Others, such as the
$18 billion Swire Properties  1972.HK , have warned that
demonstrations could dampen sales.
    Developers have weathered slumps before, and falling
interest rates should help cushion the current blow. This time
may prove painful for another reason, however: China’s
state-controlled media has started blaming high real estate
prices as a factor fuelling the protests. A People’s Daily
commentary this month accused the city’s developers of hoarding
land, warning them to stop “playing their own calculations,
smashing the land, earning the last copper plate”.
    The housing issue is certainly a problem, and the souring
mood could result in concrete changes. There’s already some
evidence that traditional political coalitions may be shifting
in a place where real estate tycoons have historically exercised
tremendous influence over policymaking. The city’s biggest
pro-Beijing party recently called for the government to invoke a
controversial law to seize land from private owners in order to
build public housing units. The government previously estimated
developers are sitting on at least 1,000 hectares of
agricultural land.
    That may help to explain why New World Development is
suddenly donating some 3 million square feet of its farmland
reserves for social housing. The company says the move is a
separate issue from the calls to take back land, but it’s hard
to believe executives are not reading the tea leaves; others
such as Henderson have made conciliatory noises as well. If the
political winds continue to shift, it may not be the last
concession to come from the city’s property magnates.
    On Twitter https://twitter.com/cbeddor
    
    CONTEXT NEWS
    - Hong Kong’s Lands Department said on Sept. 25 that the
government had rejected all tenders for a commercial plot of
land in the Kai Tak area, site of the city’s former airport,
after the bids did not meet its reserve price.
    - The government said that in recent years six sales had
been cancelled due to tenders that came in below reserve prices.
The statement added that officials “will not speculate on the
reasons accounting for the bids placed by tenderers”. The
reserve price was not disclosed.
    - New World Development said on Sept. 25 that it would
donate 3 million square feet of its farmland reserves for social
housing.
    -  For previous columns by the author, Reuters customers can
click on  BEDDOR/ 
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Hong Kong government announcement    https://www.info.gov.hk/gia/general/201909/25/P2019092500637.htm
Hong Kong's New World Development donates farmland for social
housing     urn:newsml:reuters.com:*:nL3N26G2T1
BREAKINGVIEWS-Hong Kong’s jittery shoppers are a bad omen   
 urn:newsml:reuters.com:*:nL3N25Q1TK
BREAKINGVIEWS-Hong Kong’s pain offers Singapore a little gain   
 urn:newsml:reuters.com:*:nL3N25P0HV
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Editing by Una Galani and Sharon Lam)
 ((christopher.beddor@thomsonreuters.com; Reuters Messaging:
christopher.beddor.thomsonreuters.com@reuters.net))