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Friday 5 December 2008
‘A year ago, getting a loan was easy as a whistle ... but now, bankers are singing a different tune’
Leaving a banker’s office empty-handed was almost unheard of during the good times for city property developers. But the situation has since changed as the global economy heads into recession.
‘A year ago, getting a loan was easy as a whistle ... but now, bankers are singing a different tune’
Sandy Li 5 December 2008
Leaving a banker’s office empty-handed was almost unheard of during the good times for city property developers. But the situation has since changed as the global economy heads into recession.
“A year ago, I merely showed my face in a banker’s office and getting a loan was easy as a whistle,” a developer said. “But now, bankers are singing a different tune and they are a lot more stringent. They even visit construction sites to make sure loans proceeds are used to fund new housing projects.”
The cost of borrowing for first-tier developers has increased by at least 0.7 percentage points from a year ago. Small to mid-sized developers, particularly Hong Kong-listed mainland players, face a rise of 10 percentage points.
It means annual interest for every HK$1 billion borrowed will cost a developer an extra HK$7 million to HK$100 million more than last year.
With fund-raising on stock and debt markets becoming difficult, developers have focused on improving cash flow rather than spending - even on land.
“Everyone, no matter whether you are a developer or an end user, will act extremely cautiously in a time of great unknowns,” said Tony Tse Wai-chuen of Henderson Land Development.
He doubted whether developers would be eager to trigger sites from the land application list for auction. Under the application list system, a developer can trigger an auction by making a guarantee bid that is at least 80 per cent of a site’s reserve price.
Mr. Tse said a company had to try hard to reach an agreement with the government over the reserve price and even then it had to compete with other bidders. “The chances of winning are not good,” he said.
Developers have deferred the launch of residential projects and are not rushing to replenish land stocks as market sentiment remains clouded by defaults and bankruptcies.
With banks unwilling to lend on a sufficiently high valuation, interest in home buying last month dropped to the lowest level in 17 years.
Only 3,786 properties were sold for a total consideration of HK$10.65 billion, the Land Registry said - below the market’s 2003 downturn.
Fredy Wu Yat-fat, CEO of Hong Kong Properties, said there had been only 7,735 registered transactions for new flats by October 16, down 40 per cent from a year ago.
Analysts predict a fall of 20 to 30 per cent in property prices in the coming year. The MTR Corporation has also shelved the tender for phase four of its Lohas Park scheme in Tseung Kwan O.
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‘A year ago, getting a loan was easy as a whistle ... but now, bankers are singing a different tune’
Sandy Li
5 December 2008
Leaving a banker’s office empty-handed was almost unheard of during the good times for city property developers. But the situation has since changed as the global economy heads into recession.
“A year ago, I merely showed my face in a banker’s office and getting a loan was easy as a whistle,” a developer said. “But now, bankers are singing a different tune and they are a lot more stringent. They even visit construction sites to make sure loans proceeds are used to fund new housing projects.”
The cost of borrowing for first-tier developers has increased by at least 0.7 percentage points from a year ago. Small to mid-sized developers, particularly Hong Kong-listed mainland players, face a rise of 10 percentage points.
It means annual interest for every HK$1 billion borrowed will cost a developer an extra HK$7 million to HK$100 million more than last year.
With fund-raising on stock and debt markets becoming difficult, developers have focused on improving cash flow rather than spending - even on land.
“Everyone, no matter whether you are a developer or an end user, will act extremely cautiously in a time of great unknowns,” said Tony Tse Wai-chuen of Henderson Land Development.
He doubted whether developers would be eager to trigger sites from the land application list for auction. Under the application list system, a developer can trigger an auction by making a guarantee bid that is at least 80 per cent of a site’s reserve price.
Mr. Tse said a company had to try hard to reach an agreement with the government over the reserve price and even then it had to compete with other bidders. “The chances of winning are not good,” he said.
Developers have deferred the launch of residential projects and are not rushing to replenish land stocks as market sentiment remains clouded by defaults and bankruptcies.
With banks unwilling to lend on a sufficiently high valuation, interest in home buying last month dropped to the lowest level in 17 years.
Only 3,786 properties were sold for a total consideration of HK$10.65 billion, the Land Registry said - below the market’s 2003 downturn.
Fredy Wu Yat-fat, CEO of Hong Kong Properties, said there had been only 7,735 registered transactions for new flats by October 16, down 40 per cent from a year ago.
Analysts predict a fall of 20 to 30 per cent in property prices in the coming year. The MTR Corporation has also shelved the tender for phase four of its Lohas Park scheme in Tseung Kwan O.
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