Hong Kong land prices baffle tycoon with 50 years experience

[HONG KONG] After more than 50 years as a Hong Kong developer, octogenarian billionaire Lui Che-Woo says he's having trouble reading the city's property market these days.

"I can't see clearly what's happening in Hong Kong's property market," 87-year-old Mr Lui said in an interview, after failing to win any land bid this year.

"Recently land prices have surged so much. I really don't know what's happening right now. I need time to think quietly for a while before figuring out the situation we are in."

K Wah International Holdings, Mr Lui's listed property arm, has submitted 16 tender bids in land auctions so far in 2016, while failing to win any. Large Hong Kong developers have been reluctant to make high bids on land after home prices fell and sales slowed earlier this year, opening the way for smaller local companies and mainland Chinese firms.

"It's a shame that we have also tried hard to bid for land in Hong Kong, but failed," Mr Lui said. "It's been a headache."

The uncertainty in the property market, despite a recent rally, has made developers cautious while bidding for land. K Wah International has been outbid at this year's land auctions by developers from mainland China and unlisted Hong Kong firms, including a company controlled by Angela Leong, an executive director of SJM Holdings Ltd, which competes with Mr Lui's Galaxy Entertainment Group Ltd in Macau's casino market.

Chinese developer Minmetals Land Ltd last month outbid Hong Kong giants Sun Hung Kai and Sino Land Co with an HK$4 billion (S$694.4 million) offer for land in the territory's Kowloon district.

The price worked out to about HK$7,058 per square foot of saleable area, almost twice the valuations some industry experts had placed on the site.

There have been signs of a property rebound in Hong Kong, where prices have fallen from their all-time high in September. After slumping as much 13 per cent between September and March, home prices have risen in recent months and transaction volumes rose in August to the highest in 14 months.

Prices are still 7.3 per cent below last year's peak, according to Centaline Property Agency Ltd.

On the weekend, China Overseas Land & Investment Ltd's 300 unit One Kai Tak project sold out within a day, even though they were reserved for Hong Kong residents only. Sun Hung Kai Properties Ltd raised prices at its Grand Yoho project as much as 16 per cent, the Hong Kong Economic Times reported Wednesday, after the first stage of 228 apartments sold out on the weekend, according to the Ming Pao newspaper.

In 1955, Mr Lui founded K Wah Group, whose construction materials have been used in a quarter of all Hong Kong buildings, according to the company's website.

He moved into property development with his first residential project in 1962. Mr Lui, who has a net worth of US$7.7 billion, according to the Bloomberg Billionaires Index, transferred shares valued at US$1 billion to charitable foundations last September and set up a prize for those who have made contributions to human welfare.

Mr Lui was also cautious on the outlook for his Macau business, saying it's too early to tell whether the US$29 billion casino industry is rebounding even after August's bump in revenue halted a two-year decline.

"While Macau's gambling industry has hit the bottom, it's still too early to call it a recovery," Mr Lui said.

"Give me two more years to see. It takes time to gradually attract more mass-market customers."

BLOOMBERG