HONG KONG - 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, Henderson Land Development and New World Development – 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, 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.
- 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.
(Editing by Una Galani and Sharon Lam) ((firstname.lastname@example.org; Reuters Messaging: email@example.com))