Cheung Kong 'not that bullish' on Asia's housing market: Update

Cheung Kong (Holdings), Hong Kong billionaire Li Ka-shing’s property company, is “not that bullish” on Asia’s housing market as governments introduce more curbs to contain prices, Executive Director Justin Chiu said.

Hong Kong’s second-biggest developer also expects home prices in the city to remain little changed after the government on June 10 imposed more measures including bigger down payments, making it hard to repeat the 20% to 30% gains in previous years, he said.

 

“I’m not that bullish on the Asian residential property market as I was last year,” Chiu told reporters in Singapore today. “It’s not going to collapse. You have to be cautious as some governments have already taken actions to cool down the market.”

 

Asia’s recovery from the credit crisis turned into a boom for many of the region’s property markets as surging economic growth and low interest rates drove housing prices higher, prompting governments from Hong Kong, China to Singapore to intensify curbs that ranged from taxes on home sales to higher down payments on mortgages.

 

“Home prices are already quite high and housing is a public concern in Asia,” Chiu said. “Interest rates are likely to go up. If I were to invest in Asian properties, I would go into office and retail markets. It’s not that political.”

PRICE DECLINE

Hong Kong property prices may fall as much as 15% by the end of the year, said Walter Kwok, former chairman of Sun Hung Kai Properties, the world’s biggest developer by market value in an interview on June 18. Savills Plc has said the city is the world’s most expensive place to buy an apartment

 

Government officials including Chief Executive Donald Tsang have warned of an asset bubble in the Chinese city, where home prices have surged more than 70% since the beginning of 2009. In the most recent measures to curb prices on June 10, the government raised up-front payments for properties costing more than HK$6 million ($950,811) and required borrowers whose income is primarily from outside Hong Kong to deposit an extra 10% when they buy properties unless they can demonstrate a “close connection” to the city.

 

WON’T REPEAT GAINS

“The Hong Kong market is not going to fall, but we’re not likely to see the 20 to 30% increases in the past years,” Chiu said. “We will not see another 10% we’ve seen in Hong Kong in the second half of the year,” he said, referring to the gains so far this year.

 

Hong Kong’s home prices may drop 10% to 20% in 2012 and a further 10% in 2013 on rising interest rates, Andrew Lawrence, a Hong Kong-based analyst at Barclays Capital, said in a June 7 Bloomberg Television interview.

 

Cheung Kong’s shares rose 0.2% to HK$109.10 at the close in Hong Kong, while the Hang Seng Property Index gained 1%. The Bloomberg Asia Pacific Real Estate Index climbed 1.3%.

 

Chinese Premier Wen Jiabao said on May 1 that the nation is “determined” to bring down housing prices in some cities to a “reasonable” level. The government raised the minimum down payment for second-home purchases this year and introduced residential taxes in Shanghai and Chongqing. Beijing and Guangzhou also imposed restrictions on housing purchases.

 

“The government has taken a tough stance,” said Chiu, referring to the Chinese measures. “We have already seen volumes in major cities come down. The government measures are working. It’s actually been quite effective this time by pulling out liquidity from the market.”

 

In Singapore, where demand for private homes and mortgages has boosted earnings for companies including lender DBS Group Holdings and real-estate developer City Developments, measures to curb property speculation have resulted in slower price gains for six consecutive quarters.