Anyone who bought into Hong Kong’s big property developers five years ago would have suffered sleepless nights at first – then enjoyed a stunning boom. The territory is both pegged to cheap US credit and geared to China’s growth. But if the era of an ultra-easy Federal Reserve ends, is China’s stabilising growth enough to support the developers’ shares?
Property has a very prominent place in the Chinese territory. Nine of the world’s top 10 listed developers by market capitalisation are Asian, according to S&P Capital IQ. Half of their net assets sit with Hong Kong’s biggest – Sun Hung Kai, Cheung Kong, Wharf Holdings and Swire Pacific. In few other places might one find the main power utilities holding a stake in a landmark development and the metro operator making more than half its money from developing and managing property. Over the past five years, total returns on the Hang Seng property index have averaged more than 12 per cent a year – twice those of its US equivalent.
Talk of a bubble is now common. Residential prices had doubled in five years, yet are now off 3 per cent from this year’s peak. Measures such as raising stamp duty and imposing borrowing limits were cooling things even before the worries about tighter US policy arose. Prices are expected to slide further this year as mainland Chinese buyers step back. But there is another side to China’s interest in Hong Kong property – its shops. Wharf Holdings last month reported a 17 per cent rise in operating profits from its Harbour City mall, a haunt for mainland shoppers.