Don’t bet against Hong Kong’s billionaire property tycoons, even if the city’s incoming chief executive takes a tough stance on reining in soaring home prices.
After a short-lived dip as the city’s government ratcheted up real estate curbs in November, property stocks have bounced back and so has the wealth of billionaires including Li Ka-shing and Lee Shau Kee.
More than seven years into Hong Kong’s campaign to tame runaway home prices, real estate moguls account for nine of the 10 wealthiest people in the city, according to the Bloomberg Billionaires Index.
Hong Kong’s property market has defied any attempts to cool prices, despite a raft of measures to bring them down. As the city’s election draws close, the two leading candidates have both singled out unaffordable housing as an issue, signaling that new measures may be rolled out to address rising prices. A committee of about 1,200 business and political elites will be voting later this month on who will become the next chief executive.
Housing costs have dogged current chief Leung Chun-ying over the course of his five years in power. Carrie Lam, the former chief secretary and one of the leading candidates to succeed Leung, has pledged to form a taskforce to increase the city’s land supply and create a new class of subsidized housing for first-time buyers and middle class residents. Her main rival, former Financial Secretary John Tsang, says that he’ll provide public housing for 60 percent of the population from its current level of 45.6 percent and build affordable homes for the middle class as well.
Still, Hong Kong’s property billionaires have weathered policy shocks well. The initial losses of more than $4.4 billion that hit eight of the ten richest people in Hong Kong after the city’s leaders announced a stamp duty hike in November have since been all but erased. Cheung Kong Property Holdings Ltd.’s Chairman Li, the city’s wealthiest person, and Henderson Land Development Ltd.’s Lee were among the billionaires who saw their fortunes return to virtually the same level on the Bloomberg Billionaires Index after earlier declines.
Over the past four years that data is available, a period that has seen periodic bouts of policy tightening, the city’s property billionaires have seen their collective fortunes rise 19 percent as the Hang Seng Properties Index has surged at 10 times the pace of the broader index. Even aggressive forays from mainland competitors haven’t dented the fortunes of Hong Kong’s richest.
Perversely, even after the curbs in November, developers continued to see brisk sales for new apartments in Hong Kong as they’ve been able to entice buyers with discounts and rebates, while sales of homes by individuals have dried up. Sellout crowds at new apartment openings have become the norm, giving developers power to increase prices.
“The rich are inconvenienced by it, but it’s the middle class that are hurt the most,” said Peter Churchouse, the managing director of Portwood Capital and author of The Churchouse newsletter, referring to the latest property curbs.“It makes selling in the secondary market extremely difficult because buyers have to pay the tax up front, whereas the payments are deferred in the pre-sales market.”