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Hong Kong Home Prices Are Unsustainable, $2.6 Billion Fund Says

By Pooja Thakur Mahrotri

/ Bloomberg |

January 5, 2018 12:02 PM SGT

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Hong Kong’s home prices are at unreasonable levels that can’t be sustained, according to SC Capital Partners, a $2.6 billion real estate private equity firm.

Despite cooling measures such as stamp duties, investors have persisted with purchases that “violate” investing fundamentals, Suchad Chiaranussati, the founder of the Singapore-based SC, said in an interview.

The comments from a firm that invests in residential, office, retail and logistics properties across Asia add to a drumbeat of concern over a Hong Kong housing sector that the International Monetary Fund has described as “booming and overvalued.” The city’s Chief Executive Carrie Lam said last month that government measures to cool the world’s most-expensive property market hadn’t worked.

Hong Kong’s richest man, Li Ka-shing, told reporters on Thursday evening that demand remained “very strong” for property in the city, without making any specific forecast for the residential market. “I’m still building hotels and have bought shopping malls, getting rental income for the long term,” said CK Hutchison Holdings Ltd.’s billionaire chairman.

Taming Prices

Singapore has been better at managing surging home prices, intervening early to prevent any bubble, Chiaranussati said.

“Singapore’s government is very good at taking money from the rich through stamp duties and recycling it to the public housing program, while in Hong Kong public housing is a small component, so they don’t have the ability to do that,” he said.

Demand from mainland Chinese buyers has contributed to bubbly prices in Hong Kong, according to Chiaranussati, who expects SC to close a $1 billion property fund in the second quarter after raising about $380 million so far. Rising interest rates could hit property prices in the city, he added.

In other comments, Chiaranussati said:

> SC is evaluating Southeast Asian investments and plans to boost holdings in Australia and Japan

> Possibilities for the firm in Singapore, which is starting to offer value, include so-called en-bloc, or redevelopment, residential projects; a joint venture with a local partner; and office purchases in the S$100 million to S$300 million ($75 million to $225 million) range

> A third of the $451.5 million raised for an Asia-focused fund in the middle of last year has been invested in about seven assets in South Korea, Australia, Japan, Hong Kong and New Zealand

This story, written by Pooja Thakur Mahrotri for Bloomberg, first appeared on Jan 5.

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