Hang Lung banks on China land

Hang Lung Properties, Hong Kong's fourth-largest developer by market value, will push ahead with plans to buy land in mainland China even as prices rise, chairman Ronnie Chan said. Land costs in China may make up as much as a third of Hang Lung's total project costs there by the end of next year, up from 17 per cent now, he said.

Hang Lung operates two commercial properties in Shanghai, and has bought land in cities including Tianjin, Shenyang and Wuxi. 'I don't care about these short-term fluctuations in the prices,' said Mr Chan in Singapore. 'Things are cyclical, what is a peak? A peak is only relative to the day before.'

Chinese property prices have surged in the past seven years as an economic boom drove up demand. Hang Lung is pledging to invest 40 billion yuan (S$7.8 billion) on commercial projects in as many as 11 cities. The developer plans to have acquired land for as many as 18 projects by the end of 2009, investing between 2 and 2.5 billion yuan on each.

'There has been an acceleration in land appreciation occurring in 2007,' said James Macdonald, senior manager at Savills Research (China). 'This is particularly true in first-tier cities where land in downtown areas is becoming particularly scarce.'

The company's focus on commercial development in China limits the effects on Hang Lung of government measures to curb residential prices, Mr Chan said. 'The policy is not directed at my strategy so much and that is one of the reasons why Hang Lung chose to concentrate on commercial properties, rather than residential.'

The government has sought to restrain the industry after home prices in 70 major cities surged 11.3 per cent in January from a year earlier, the most since the index was started in July 2005. -- Bloomberg

Source : Business Times - 13 Mar 2008