Property Market Bounce Fuels Rising Profits For Developers

by Mary Swire, Tax-News.com, Hong Kong

04 March 2005

The turnaround in Hong Kong’s economic fortunes during 2004, particularly in the real estate sector, helped the territory’s property developers realise huge gains in profits during the last half of 2004.

For example, profit at Sun Hung Kai, the territory’s biggest property developer, surged by 95% year-on-year during the last half of 2004 on sales that have climbed by 30% to just under $11.3 billion, the firm reported yesterday.

According to government data, from July to December 2004, home sales in Hong Kong climbed 40% by value and 12.6% by volume compared to the same period in 2003.

Meanwhile, Hong Kong’s total property sales, which consisted mainly of residential apartments, increased by 86% in 2004 as home prices grew by 33%.

According to reports, analysts are expecting this trend to continue through 2005, with some estimating that property prices will rise by 15% to 20% this year.

Much of this rise, according to Franklin Lam, head of Hong Kong equities at UBS, is likely to be fuelled by demand for Hong Kong’s services industries from mainland China.

“Hong Kong is like a glass of clear water about to be mixed with red ink five times its size," Mr Lam stated in a Reuters report.

"Housing has a multi-year upcycle and it's rare that there's not more than a doubling in prices," he added.

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