Sun Hung Kai Denies China Is Pressing Hong Kong Developers

·3 min read

(Bloomberg) -- Hong Kong’s biggest developer and a real estate industry group poured cold water on the notion that the Chinese government is putting pressure on the city’s developers.

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Sun Hung Kai Properties Ltd. hasn’t heard of information suggested in media reports that Beijing is squeezing builders, it said in a statement late Monday. The Real Estate Developers Association of Hong Kong said it was unaware of any meetings between developers and Beijing officials.

The remarks came after shares of Hong Kong property giants plunged following a Reuters report that said Chinese officials told the city’s developers to redirect resources to help solve a housing shortage. Beijing is no longer willing to tolerate “monopoly behavior,” the report quoted an unidentified source as saying.

Read how Hong Kong’s property tycoons took a hit on China fears

That spurred fears that President Xi Jinping’s “Common Prosperity” policy agenda, which has swept through large swathes of industries on the mainland, is finally stretching into the city’s property companies. Monday’s sell-off -- exacerbated by contagion fears from the liquidity crisis at China Evergrande Group -- wiped $6.7 billion from the value of assets of the families of Hong Kong’s four top property giants.

At a regular press briefing Tuesday, the city’s leader Carrie Lam said Beijing attached “great importance to livelihood issues in Hong Kong,” while declining to comment directly on the media reports.

She reiterated her government’s legal ability to “take over” private land from developers to build public housing to tackle the issue, and said companies were “willing to cooperate” with such policies. Lam is set to deliver her 2021 policy address on Oct. 6.

Shares of Hong Kong developers rose on Tuesday, with the Hang Seng Property Index climbing as much as 2.6% after tumbling the most in more than a year Monday. Sun Hung Kai advanced as much as 3.7%, with New World Development Co., CK Asset Holdings Ltd. and Henderson Land Development Co. also gaining as of 2:34 p.m.

Sun Hung Kai, the city’s largest developer by market value, said it never agrees with monopolistic practices. The company actively cooperates with the Hong Kong government by participating in land sharing programs and building transitional housing, it said.

Stewart Leung Chi-kin, executive committee chairman of the Real Estate Developers Association of Hong Kong, said in a phone interview that he hadn’t heard from its members of any individual meetings with central government officials.

Protest Blame

Hong Kong’s property prices, the most expensive in the world, have been blamed by Chinese officials for contributing to the 2019 pro-democracy protests. In July, China’s top official to Hong Kong, Xia Baolong, set a goal for the city to eliminate its notoriously small homes by 2049.

Real estate firms in the city want to cooperate with the government to solve the housing problems, Leung said. Local media including TVB News reported similar remarks earlier.

Sun Hung Kai is positive on the long-term development potential of Hong Kong and mainland China and will continue investing, the company said.

The main concern is that Beijing will ask the Hong Kong government to impose price caps and purchase restrictions, said Raymond Cheng, head of China and Hong Kong property research at CGS-CIMB Securities. Still, the chance of Hong Kong adopting the same housing policies as the mainland is low, given that the government reiterated the “One Country Two Systems” principle, Cheng wrote in a note.

Lam “may need to deal with the city’s housing supply problem” at her policy address next month, Bloomberg Intelligence analyst Patrick Wong wrote in a note. One option is to introduce a tax on unsold properties, an idea that was shelved last year, he said.

(Updates with comment from BI analyst in the last paragraph)

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