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Mainland projects lift costs for HK firms
Source: Bloomberg News |
October 9, 2012, Tuesday
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Print Edition
HONG Kong builders face increases of more than 10 percent a year in construction costs because of competition for workers and materials from projects on the Chinese mainland, according to Sun Hung Kai Properties Ltd, the world's biggest developer by value.
"We're seeing double-digit increases every year, and we'll be seeing this for quite some time," Victor Lui, deputy managing director at Hong Kong-based Sun Hung Kai, has said. "There're a lot of projects going on in the mainland, and we are competing with them for everything: materials, workers, even architects, designers and surveyors."
The city is the world's most expensive place to buy a home after prices rose more than 90 percent since early 2009 on a lack of new supply, an influx of buyers from other Chinese cities and record low mortgage rates. Rising construction costs may further drive up prices, which have now surpassed the level in 1997 on the eve of the city's last major property crash.
Construction costs for most housing developments in Hong Kong range from HK$3,000 (US$387) to HK$4,000 per square foot, with luxury projects costing more, said Lui, who joined the developer as a trainee in 1977.
"When homebuyers see costs going up at this pace, they would expect prices to rise in the future," said Lui.
Sun Hung Kai reported staff costs rose 13 percent to HK$5.05 billion in the 12 months ended June 30 from a year earlier, according to its annual report published in September.
Sun Hung Kai has an estimated gross margin, a measure of profitability, of 41.6 percent for the current fiscal year, compared with 31.8 percent average margin for developers on the mainland.
Lui, 57, was promoted to his current position in July to assist Thomas and Raymond Kwok, the company's co-chairmen charged by Hong Kong's anti-graft agency for conspiring to provide the city's former No. 2 official, Rafael Hui, with payments and loans for unspecified favors. Their case will be mentioned in court again on Friday.
Lui declined to comment on the case and has previously said operations of the developer won't be affected.
"We're seeing double-digit increases every year, and we'll be seeing this for quite some time," Victor Lui, deputy managing director at Hong Kong-based Sun Hung Kai, has said. "There're a lot of projects going on in the mainland, and we are competing with them for everything: materials, workers, even architects, designers and surveyors."
The city is the world's most expensive place to buy a home after prices rose more than 90 percent since early 2009 on a lack of new supply, an influx of buyers from other Chinese cities and record low mortgage rates. Rising construction costs may further drive up prices, which have now surpassed the level in 1997 on the eve of the city's last major property crash.
Construction costs for most housing developments in Hong Kong range from HK$3,000 (US$387) to HK$4,000 per square foot, with luxury projects costing more, said Lui, who joined the developer as a trainee in 1977.
"When homebuyers see costs going up at this pace, they would expect prices to rise in the future," said Lui.
Sun Hung Kai reported staff costs rose 13 percent to HK$5.05 billion in the 12 months ended June 30 from a year earlier, according to its annual report published in September.
Sun Hung Kai has an estimated gross margin, a measure of profitability, of 41.6 percent for the current fiscal year, compared with 31.8 percent average margin for developers on the mainland.
Lui, 57, was promoted to his current position in July to assist Thomas and Raymond Kwok, the company's co-chairmen charged by Hong Kong's anti-graft agency for conspiring to provide the city's former No. 2 official, Rafael Hui, with payments and loans for unspecified favors. Their case will be mentioned in court again on Friday.
Lui declined to comment on the case and has previously said operations of the developer won't be affected.
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