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Wednesday, 17 December 2008
Henderson to test market with discounts
Hong Kong’s third-biggest property developer, Henderson Land Development, is poised to test the market with a limited release of discounted units in 10 residential projects it built on the mainland over the past three years.
Hong Kong’s third-biggest property developer, Henderson Land Development, is poised to test the market with a limited release of discounted units in 10 residential projects it built on the mainland over the past three years.
The launch will proceed in the new year, according to executive director John Yip Ying-chee, though the initial sales targets will be cut by half because of poor buyer sentiment.
Prices of the units in these projects, mainly in second-tier cities, would be 15 to 20 per cent below the developer’s original expectations, reflecting the slowdown, he added.
The company started investing in large-scale residential projects in mainland cities in 2006.
“The first-phase pre-sale of the 10 developments in different cities will begin next year. Originally we planned to sell 120,000 square metres of gross floor area in each project. Now we will cut that target to 60,000 sq m to test the market response.
“If the response is no good, we will slow sales progress,” said Mr. Yip.
The projects are in Changsha, Suzhou, Yizing and Xuzhou. They will be completed in the second half of next year.
Mr. Yip said prices would be in line with market trends, meaning 15 to 20 per cent lower than what was originally targeted.
But the reduction in profit margins would not be as marked, he added, because construction costs had gone down along with property prices.
At the end of June, Henderson had a land bank in the mainland of about 115.7 million sq ft in developable gross floor area, of which around 78 per cent was earmarked for residential development to be sold, according to the company’s interim result announced in September.
Because of a more moderate rise in property prices during the boom period for the sector, second-tier cities had so far been relatively less affected by the austerity policies aimed at cooling demand for property, said Mr. Yip.
Most of Henderson’s projects were in these cities, he added.
He said the company was still looking for investment opportunities and had recently received offers from local city governments. The proposals relate to developing government sites returned by mainland developers that had failed to proceed with their projects because of lack of funding.
“We get these offers almost every week,” said Mr. Yip, who added that officials were now offering land at much lower prices.
“In one case, the asking price was less than one-third of the original transacted value,” he said.
But since land price was a small component of the total development cost, the deals had to be weighed with care, he added.
In second-tier cities, land costs are around 700 to 800 yuan per square metre, but construction costs could be double or triple this amount depending on the scale of the project and its quality.
“What we are looking for is that the property market will regain its upward cycle in about three to four years’ time,” he said. “But this will depend on the global and mainland economies in the first half of next year.”
Meanwhile, David Ng, property analyst at Royal Bank of Scotland, said in a new report that it remained cautious about the near-term performance of the mainland’s real estate sector, with recovery still elusive after a year in the doldrums.
“We expect the recovery to be driven largely by subtle changes in market sentiment. Price and volume declines may stabilise by mid-2009 but the duration of the slump beyond that is still uncertain,” the report said.
1 comment:
Henderson to test market with discounts
Peggy Sito
15 December 2008
Hong Kong’s third-biggest property developer, Henderson Land Development, is poised to test the market with a limited release of discounted units in 10 residential projects it built on the mainland over the past three years.
The launch will proceed in the new year, according to executive director John Yip Ying-chee, though the initial sales targets will be cut by half because of poor buyer sentiment.
Prices of the units in these projects, mainly in second-tier cities, would be 15 to 20 per cent below the developer’s original expectations, reflecting the slowdown, he added.
The company started investing in large-scale residential projects in mainland cities in 2006.
“The first-phase pre-sale of the 10 developments in different cities will begin next year. Originally we planned to sell 120,000 square metres of gross floor area in each project. Now we will cut that target to 60,000 sq m to test the market response.
“If the response is no good, we will slow sales progress,” said Mr. Yip.
The projects are in Changsha, Suzhou, Yizing and Xuzhou. They will be completed in the second half of next year.
Mr. Yip said prices would be in line with market trends, meaning 15 to 20 per cent lower than what was originally targeted.
But the reduction in profit margins would not be as marked, he added, because construction costs had gone down along with property prices.
At the end of June, Henderson had a land bank in the mainland of about 115.7 million sq ft in developable gross floor area, of which around 78 per cent was earmarked for residential development to be sold, according to the company’s interim result announced in September.
Because of a more moderate rise in property prices during the boom period for the sector, second-tier cities had so far been relatively less affected by the austerity policies aimed at cooling demand for property, said Mr. Yip.
Most of Henderson’s projects were in these cities, he added.
He said the company was still looking for investment opportunities and had recently received offers from local city governments. The proposals relate to developing government sites returned by mainland developers that had failed to proceed with their projects because of lack of funding.
“We get these offers almost every week,” said Mr. Yip, who added that officials were now offering land at much lower prices.
“In one case, the asking price was less than one-third of the original transacted value,” he said.
But since land price was a small component of the total development cost, the deals had to be weighed with care, he added.
In second-tier cities, land costs are around 700 to 800 yuan per square metre, but construction costs could be double or triple this amount depending on the scale of the project and its quality.
“What we are looking for is that the property market will regain its upward cycle in about three to four years’ time,” he said. “But this will depend on the global and mainland economies in the first half of next year.”
Meanwhile, David Ng, property analyst at Royal Bank of Scotland, said in a new report that it remained cautious about the near-term performance of the mainland’s real estate sector, with recovery still elusive after a year in the doldrums.
“We expect the recovery to be driven largely by subtle changes in market sentiment. Price and volume declines may stabilise by mid-2009 but the duration of the slump beyond that is still uncertain,” the report said.
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