Top Hong Kong developer’s profit increases on market recovery

[HONG KONG] Hong Kong’s biggest developer reported a 4.6 per cent increase in full-year profit, underscoring renewed momentum for property companies as the city’s real estate market recovery gathers steam.

Sun Hung Kai Properties’s underlying earnings, excluding property revaluations, rose to HK$22.9 billion (US$2.9 billion) for the year ended Jun 30, it said in a filing on Thursday (Sep 10).

The second straight annual profit increase came after three years of decline amid the city’s prolonged property downturn. The figure compared with the HK$23.2 billion average estimate, indicated data compiled by Bloomberg.

Developers including Sun Hung Kai are poised to gain from the rebound in the housing market as home prices head for their strongest growth in nearly a decade, according to Bloomberg Intelligence.

Prices are set for a sharp recovery this year, driven by robust mainland Chinese demand, tight inventory and rising rental yields, analysts said. Still, headwinds are rising as buyers grow cautious over China’s measures to curb mainland capital outflows.

Sun Hung Kai said in a statement that the sector was benefiting from many factors including a robust economy. Property sales contributed HK$8.3 billion of profit for the developer. It recorded HK$40.6 billion in contracted sales in the period. 

“Hong Kong’s residential property market continued its recovery, underpinned by improved economic conditions, an active financial market, and a relatively accommodative interest rate environment,” Sun Hung Kai said.

It added that a sustained inflow of talent and students had helped drive a steady rise in rents, reinforcing confidence of home buyers. The group’s rental income rose 2 per cent in the period.

Hong Kong is also seeing a broad recovery in its prime office sector after years of sluggish demand and elevated vacancies. A strengthening economy and a surge in equity capital market deals are encouraging financial firms to expand and upgrade office space.

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Sun Hung Kai will offer a full-year dividend of HK$3.91 per share, up 4 per cent from a year earlier. Its shares have surged 23 per cent so far this year versus a 2.6 per cent decline in Hong Kong’s HSI Index. BLOOMBERG