Henderson hopes to buy farm land

It wants to take advantage of prices in weak market

Developer Henderson Land plans to persuade the Hong Kong government to sell agricultural land so that it can take advantage of cheaper prices as the property market weakens, an executive said yesterday.

Property firms who bought land in a slump during a 2003 outbreak of severe acute respiratory syndrome (Sars), including heavyweight Sun Hung Kai Properties, notched up big profit margins when they built on it as the market recovered.

Henderson Land would try to follow a similar tactic, company vice-chairman Colin Lam said.

‘Property prices have fallen in 2008 and future land premium payments will also be lower,’ he told reporters after a shareholders’ meeting. ‘The company will take advantage of that to up its land bank in the city.’

A Reuters poll of analysts earlier this month showed that apartment prices were expected to slide more than 20 per cent by the end of 2009.

A Hong Kong University index, which is based on real transactions, shows that home prices on Hong Kong island slipped 6.3 per cent from a peak at the end of March to the end of September.

But brokers GFI said that indicative property derivative levels suggest that investors believe that prices will reach the bottom of a trough in December 2009, falling 30 per cent from the March 2008 level.

Reflecting the downturn, Sun Hung Kai cut its apartment sales target last week by a fifth, and the firm has seen stronger sales at its projects in recent weeks than many rivals.

But Henderson’s chairman, Lee Shau-kee, insisted that Hong Kong’s property market had already bottomed, and would pick up towards the end of 2009, even though he believed that the worst of the global economic slowdown was yet to come.

‘The worst for the local property market has already been seen this year. The property market has now stabilised,’ Mr Lee said. ‘We hope the overall market will pick up in the second half.’

Mr Lee, adding his voice to other optimistic predictions by Hong Kong developers, said that his firm was well protected because it did not buy land when the market was at its peak earlier this year.

Sun Hung Kai Properties said last week that it expected a 5 per cent rise in Hong Kong property prices next year.

Shares of Henderson Land, which have fallen more than 67 per cent so far this year, soared 10.8 per cent to HK$26.7 yesterday afternoon, slightly more than a 9.4 per cent rise in the benchmark property sub-index.

Source : Business Times - 9 Dec 2008