Henderson Land Development posted a 25 percent year-on-year jump in six-month net profit to HK$5.96 billion ($760 million), but the blue-chip builder’s revenue from Hong Kong property development remained flat as the city’s real estate market slumped in the second quarter.
The group’s revenue for the first half of 2023 rose 8.4 percent year-on-year to HK$10.3 billion, boosted by a 93.3 percent surge to HK$1.1 billion in the Miramar hospitality segment, Henderson Land said Tuesday in unaudited results filed with the Hong Kong stock exchange.
The period also saw Henderson Land increase its stake in a commercial property trust it manages, Sunlight REIT, from 19.5 percent to more than 20 percent. As a result, the group reclassified its investment from a “financial asset at fair value” to an “interest in associate”, recognising a one-off gain of HK$1.7 billion.
Attributable revenue from property development in Hong Kong reached HK$4.3 billion, up just HK$7 million compared with the same period last year, as the corresponding pre-tax profit contribution amounted to HK$962 million, tumbling 17 percent on lower profit margins at certain projects.
Call for Government Action
“After experiencing a short revival in the first quarter of this year, Hong Kong’s property market has become sluggish for the past two months, with decreases in both transaction volumes and prices,” co-chairmen Peter Lee and Martin Lee said in the filing.
The sons of Henderson Land founder Lee Shau-kee cited an unidentified housing project launched recently at a “shockingly low price”, while the secondary market’s downward price trend has also become obvious, the chairmen said.
“If the government does not propose any new measures and there are no upcoming favourable changes in Hong Kong, the property market will be quite depressed in the second half of 2023,” they said.
JLL confirmed the bad vibes in its Residential Sales Market Monitor report released Tuesday, noting that only 55 percent of units had been sold at projects completed in the first half of 2023 — well below the average sell-through rate of 78 percent over the last five years.
“The overall price index fell by 1.4 percent in May and June, 12.3 percent lower than the market peak in 2021,” said Norry Lee, JLL’s senior director of projects strategy and consultancy in Hong Kong. Transaction volume plunged more than 30 percent year-on-year, Lee said.
Henderson Land continues to strengthen its urban redevelopment pipeline via old tenement buildings where it has acquired more than 80 percent ownership. Such properties represent an attributable gross floor area of 3.4 million square feet (315,870 square metres) to be available for sale or lease in 2024 and beyond, the group said.
Those projects include a joint venture with Swire Properties to build a pair of residential towers and a retail podium at a site in Quarry Bay, as the partners have acquired more than 90 percent of the total units at the target properties.
Hong Kong’s Lands Tribunal this month cleared the JV to force a compulsory sale of the remaining space at 16 to 94 Pan Hoi Street and 983 to 987A King’s Road, with the reserve price valuing the ageing buildings at HK$6.3 billion ($806 million).
Still more ambitious is Henderson Land’s vision for the Central district waterfront, where the builder gained approval in February for a HK$73 billion ($9.3 billion) commercial project. The proposed development would span 1.8 million square feet across two towers for office use and a third for multi-purpose retail and event space at the site, which adjoins the IFC complex.