Bloomberg News

Hong Kong Developers Reverse Losses After Policy Address

October 12, 2011

(Updates with closing shares in second, fifth and second-last paragraphs.)

Oct. 12 (Bloomberg) -- Hong Kong developers’ shares rose, reversing losses, after the government said it will build subsidized homes and ensure supply of land for private housing, easing concerns of more curbs to damp soaring prices.

The Hang Seng Property Index, which tracks the city’s seven biggest developers, advanced 3 percent at the close in Hong Kong, after falling as much as 2.3 percent. It was the biggest gain among four industry groups on the benchmark Hang Seng Index.

More than 17,000 subsidized homes will be available to meet demand from lower-income families over four years from 2016, Chief Executive Donald Tsang said today in his final policy address before his term ends next year. The government will also provide enough land for 20,000 private homes a year, he said.

“The housing policy will have limited impact on the private property market because the units the government will launch in the first year is very small and it’s targeting a different group of people who can’t afford private housing,” said Jonas Kan, a Hong Kong-based analyst at Daiwa Capital Markets. “This is not targeting to curb the private market.”

Cheung Kong (Holdings) Ltd., the city’s second-biggest real estate company by market value, climbed 1.9 percent after sliding as much as 2 percent. Sun Hung Kai Properties Ltd., the largest, rose 2.3 percent from a decline of 2.5 percent.

Government Curbs

Home prices, which have surged more than 70 percent since the start of 2009, have been almost unchanged since June, according to an index compiled by Centaline Property Agency Ltd., the city’s biggest privately held real estate agency.

The government has tightened mortgages four times since 2009 to cool home prices that have been underpinned by record-low interest rates and an influx of wealthy Chinese buyers from other parts of the country. Hong Kong’s central bank is deprived of monetary tools to curb price gains because of its currency’s peg to the U.S. dollar.

Subsidies Return

The city scrapped a subsidized-home program, which sold apartments at a discount of about 30 percent to market prices, in 2002 after developers said the cheaper housing will cut demand for privately built homes.

“The land for public housing for now won’t have much impact on the private market,” said Kan, who expects home prices to fall 10 percent by the end of the year from the peak in June. “The government is planning to launch more land so this will give a bigger chance for Hong Kong developers to acquire land.”

The number of home sales in Hong Kong slumped 54 percent last month from a year earlier as buyers put off purchases on concern the global economy will slip into a recession.

China Resources Land Ltd., a state-controlled property developer, jumped 6.6 percent, while China Overseas Land & Investment Ltd., a builder controlled by the country’s construction ministry, fell to a four-month low in Hong Kong trading added 5.8 percent, reversing a decline of 6.7 percent.

“This is just a confirmation and removal of fears in the market of further policies that the government may have come out with in the policy address,” said Cusson Leung, a Hong Kong-based property analyst at Credit Suisse Group AG.

--Bonnie Cao. With assistance from Marco Lui in Hong Kong. Editor: Andreea Papuc, Linus Chua

To contact the reporter on this story: Bonnie Cao in Shanghai at bcao4@bloomberg.net

To contact the editor responsible for this story: Andreea Papuc in Hong Kong at Apapuc1@bloomberg.net


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