These two Hong Kong developers are set to release thousands of new homes this year to bolster profits

Hong Kong's two top developers revealed plans to sell more than 3,600 homes by the end of the year to support earnings as the outlook for the property market appears uncertain.
Sun Hung Kai Properties (SHKP), Hong Kong's biggest developer by market value, is upbeat about the market and said it would launch four projects with as many as 2,002 homes, not including unsold stock, this year.
New World Development (NWD), Hong Kong's fourth-largest developer by value, plans to release 1,604 homes from three new projects and unsold stock.
"The market is still dormant. Buyers are still holding back their purchases and we see the poor property sales results. A market recovery will not come that fast and to unload their upcoming units, developers have to set an attractive price," said Jeffrey Mak, property analyst at CGS-CIMB Securities.
He expects developers will follow the precedent set by Sino Land, which in December last year released homes at its Grand Central project in Kwun Tong at a 14 per cent discount to the prevailing market rate.
"We will see similar launches coming soon," Mak said referring to the aggressive price reductions needed to attract buyers in the current market environment.
However, an uptick in financial conditions since the start of the year could be signalling a rebound in sentiment, developers said.
"Hong Kong's stock market has increased by more than 10 per cent this year," Raymond Kwok Ping-luen, chairman and managing director at SHKP, said after the company reported on Wednesday that interim core earnings dropped 31 per cent because of a change in accounting policy. "Investment confidence is recovering."
Victor Lui, deputy managing director at SHKP, was cautiously optimistic, saying the market will be buoyant along with the launch of new projects over the next 19 months thanks to pent up demand among potential homebuyers.
"But the total volume of transaction will be a bit lower than 2018 while housing prices will remain flat," Lui said.
Adrian Cheng Chi-kong, executive vice-chairman of New World, was marginally upbeat about the market, saying home prices would increase by less than 5 per cent this year.
"There is still very strong end-user demand," Cheng said. "Unemployment and interest rate factors are still controllable."
Other market watchers expect the sparkle to return to the property sector, with Japanese investment bank Nomura revising its forecast for home price gains this year to 5 per cent, reversing its earlier forecast for a 7 per cent drop.
SHKP's interim core profit, excluding revaluation gains on investment properties, was HK$13.73 billion (US$1.75 billion) during the six-month period ending December 31, compared to HK$19.97 billion the previous year.
The company declared an interim dividend of HK$1.25 per share, up 4 per cent from last year.
Shares on SHKP rose 0.8 per cent to close at HK$132.90 before the results were announced.
Meanwhile, NWD reported record half year underlying profit, propelled by rising home sales, as it cleared unsold property off its books.
Core profit, excluding revaluation gains on investment properties, rose 29 per cent to HK$5.4 billion in the six months to December 31. Revenue soared 76 per cent to HK$49.27 billion, beating analysts' estimates.
New World declared an interim dividend of 14 Hong Kong cents per share, the same as last year. The company's shares fell 1.9 per cent to close at HK$12.66 in Hong Kong on Wednesday.
Both property developers are exploring projects that will leverage the "Greater Bay Area", a regional development plan involving 11 cities and believed to be home to 88 million residents by 2030.
Cheng said NWD would seek to create retirement accommodation for up to 5,000 among cities that include Zhuhai, Foshan, Shunde and Shenzhen in the next five years.
SHKP said the company plans to explore development opportunities on the mainland along transport hubs involving subway lines and high-speed rail.
"We have keen eyes on transport-oriented development where you have multiple railways and high-speed trains," said Adam Kwok, executive director of SHKP. "If you look at Sha Tin and Tseung Kwan O, imagine those scales even bigger in cities in China. We have years of experience in Hong Kong and Shanghai."
This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2019 South China Morning Post Publishers Ltd. All rights reserved.
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