Lee plans $2.6bln bet on Hong Kong home prices

HONG KONG: Lee Shau-kee, the billionaire chairman of Henderson Land Development Co., is planning a $2.6 billion (RM8.8 billion) bet that Hong Kong home prices will keep rising.

Lee, 81, said today he plans to spend HK$10 billion (RM4.36 billion) on property in the next two to three months and another HK$10 billion on government land premiums for its Wu Kai Sha project.

Lee predicted that home prices will rise another 10 percent in 2010, following a 30% jump this year that’s sparked a public outcry and prompted the government to try to rein in the market. The International Monetary Fund has warned of a bubble and said today Hong Kong should tighten lending rules.

Prices of Hong Kong real estate are still “reasonable” at 30% less than their 1997 peak, Sun Hung Kai Properties Ltd Vice Chairman Raymond Kwok said today. Kwok spoke after the annual shareholders’ meeting of Sun Hung Kai, Hong Kong’s largest developer by market value.

“A bubble does exist, but then the question is when is it going to burst?” said Castor Pang, research director of Cinda International Holdings Ltd. “Unless we see another 20 or 30% increase in property prices, which is unlikely, I don’t think the bubble will burst too quickly, not in the next year.”

Liquidity-driven

“Both the stock and property markets are liquidity driven, so it’s only when the liquidity is being withdrawn that the bubble would burst. There isn’t any sign of such withdrawal yet,” Pang said in a telephone interview.

Henderson shares rose 6% today, the most since Oct 30, to close at HK$60.55. Sun Hung Kai gained 1.2% to HK$118.50. The benchmark Hang Seng Index advanced 1.2%.

Hong Kong’s government last month clamped down on sales tactics that had been criticized by lawmakers.

The measures require developers selling uncompleted homes to calculate the square footage based on the usable space inside the apartment, moving away from the practice of including a proportion of common area. Developers also will have to provide better information on floor numbering.

China developers have been “very aggressive” in bidding for land at auctions in the mainland, said Alfred So, executive director of Sun Hung Kai’s real estate agency arm.

Lee said after Henderson’s annual meeting he has been selling stocks and bought about HK$5 billion in properties since the Hang Seng Index reached 20,000 points.

Henderson, the city’s third-largest developer by market value, has more than doubled in Hong Kong trading this year, making it the best performer in the Hang Seng Property Index, up 68%. Sun Hung Kai has risen 81%.

Henderson said Oct 14 it set a global record selling an apartment for HK$88,000 a square foot, on a usable-area basis.

Henderson omitted the floor numbers four, 13, 14, 24, 40 to 59, 62, 64, 65, 67, 69 and 87 at the project, called 39 Conduit Road, according to its brochure. Hong Kong developers often exclude floor numbers that include four, which sounds like the word “death” in Chinese. -- Bloomberg