Shares in Hong Kong’s 4 greatest family-owned builders have dropped greater than a 3rd prior to now 4 years, with almost $50bn wiped off their market capitalisation as Covid-19 restrictions and rate of interest rises took a toll on the property market.
4 households dominate the Hong Kong property market: the Lis of CK Asset, the Kwoks of Solar Hung Kai Properties, the Lees of Henderson Land, and the Chengs of New World Improvement.
The share costs of their Hong Kong-listed shares have fallen by a mean of about 35 per cent since April 2019, with their mixed market worth falling from about $132bn to $86bn by the tip of March. New World and Henderson noticed the most important declines, of 62 per cent and 40 per cent, respectively.
“It’s positively a harder time than it has been prior to now,” mentioned John Burns, an honorary professor of politics and public administration on the College of Hong Kong. On prime of the property slide and the 2019 protests that hit the financial system, Beijing “has been marginalising tycoons”.
Below a coverage established throughout British colonial rule, solely a tiny group of deep-pocketed households can bid for land plots at authorities auctions. Rising property costs over the previous a number of many years have fuelled the growth of those households into retail, infrastructure and telecommunications.
However in opposition to the backdrop of a 40 per cent drop in dwelling gross sales and a 15 per cent fall in residential property costs final 12 months, underlying income at Solar Hung Kai, town’s largest developer by market worth, and New World Improvement fell 36 per cent and 14 per cent, respectively, for the six months ended December 2022, whereas underlying revenue at Henderson Land additionally fell by 29 per cent in the entire of final 12 months.
CK Asset, based by Hong Kong’s richest man Li Ka-shing, posted a 2 per cent achieve in revenue final 12 months regardless of income from property gross sales in Hong Kong and mainland China falling 30 per cent, as asset disposals and a return to revenue by its UK pub enterprise Greene King helped buoy total returns.
Builders had been additionally damage by robust lockdowns in mainland China, the place their mixed income final 12 months was $4.8bn, down 40 per cent from the 12 months earlier than and the bottom since 2019.
The tycoons’ political affect has additionally weakened. Victor Li, the elder son of Li Ka-shing and chair of CK Asset, was in March stripped of his function on the standing committee of China’s prime political consultative physique. Victor Li will keep on as a member of the physique, however the transfer shocked analysts.
“It’s actually odd for somebody to stay as only a member on the CPPCC [Chinese People’s Political Consultative Conference] however doesn’t get to remain on the standing committee,” a pro-Beijing politician mentioned.
In an announcement, Victor Li mentioned he had held the standing committee place for twenty years and there have been “some ways to serve the nation”.
Analysts and pro-Beijing politicians instructed the transfer symbolised the Li household’s waning favour with Beijing, after Li Ka-shing was accused by Beijing’s Central Political and Authorized Affairs Fee of “condoning crimes” by pro-democracy protesters in 2019.
Ho-fung Hung, a professor of Chinese language political financial system at Johns Hopkins College, mentioned Beijing’s mistrust of Hong Kong enterprise magnates was additionally evident in strikes to scale back their energy within the metropolis’s de facto parliament.
“Beijing has been working to scale back the political affect of HK enterprise tycoons . . . that is all a part of the shift of Beijing coverage from allying with non-public entrepreneurs within the mainland and Hong Kong [under previous Chinese leaders] to suspecting and even repressing the affect of them underneath [Xi Jinping].”
As dwelling possession stays largely unaffordable to most residents of the extremely unequal metropolis, tycoons have confronted strain to construct extra housing. “[Beijing is] principally telling them: We’d like your co-operation, we’d like your assist. However you will need to work with us on our coverage priorities,” mentioned Burns.
The weak property market has additionally offered a possibility for Hong Kong’s property barons.
CK Asset and Solar Hung Kai have change into two of the territory’s most lively bidders for residential and business land as Chinese language builders, hamstrung by Beijing’s clampdown on property sector debt, remained on the sidelines and overseas companies decreased publicity to the market.
Whereas a glut of latest workplace area is anticipated to return on to the market within the coming years, there are some indicators of restoration within the wider property sector. In early March, Solar Hung Kai bought all 352 flats in a brand new undertaking for greater than $255mn. Costs of current properties have climbed a minimum of 7 per cent because the starting of the 12 months, based on Hong Kong property company Centaline.
Heron Lim, an economist at Moody’s Analytics, mentioned: “Hong Kong property builders haven’t seen a debt publicity akin to their mainland Chinese language counterparts.” Within the occasion of a restoration, “the Hong Kong corporations could possibly be nicely positioned”.
Hong Kong’s property tycoons
4 households’ patriarchs and next-generation leaders
Li Ka-shing, 94
Founder, CK Asset Holdings
Li Tzar-kuoi, Victor, 58
Chair, CK Asset Holdings
Lee Shau-kee, 95
Founder, Henderson Land Improvement
Lee Ka-shing, Martin, 51
Lee Ka-kit, Peter, 59
Co-chairs, Henderson Land Improvement
Cheng Kar-shun, Henry, 76
Chair, New World Improvement
Cheng Chi-kong, Adrian, 43
Govt vice-chair and CEO, New World Improvement
Kwok Ping-luen, Raymond, 71
Chair, Solar Hung Kai Properties
Kwok Kai-fai, Adam, 40
Govt director, Solar Hung Kai Properties
Images: Bloomberg/AFP/Getty Pictures/ImagineChina/SCMP/Reuters