(Corrects Feb. 28 item to add Properties in headline)
By Venus Wu
HONG KONG, Feb 28 (Reuters) - Sun Hung Kai Properties Ltd , Hong Kong's largest real estate company by market value, posted a 57 percent surge in first-half underlying net profit on Tuesday, on the back of higher contribution from development earnings and rental income.
The company, which has long benefited from its diverse portfolio of flats and office space in some of Hong Kong's best locations, said underlying profit amounted to HK$14.6 billion ($1.88 billion) in the six months ended Dec. 31, 2016, compared with HK$9.3 billion a year earlier.
Profit attributable to shareholders was HK$20.7 billion, 40.3 percent more than the HK$14.7 billion reported a year earlier.
Chairman and Managing Director Raymond Kwok said he expected the Hong Kong economy to see modest growth, but added that challenges remained for the group.
"The group's business of property development for sale will continue to perform satisfactorily, despite a tougher operating environment since late last year," Kwok said in a statement.
Deputy Managing Director Victor Lui said at a press conference after the results that the company was upbeat on the outlook for Hong Kong's property market this year.
"Overall we think this year's property market will be healthy and stable. We expect a mild rise in home prices this year," Lui said at the briefing.
Home prices, one of the major sources of social discontent in Hong Kong, have climbed for 10 consecutive months and hit yet historic highs, despite government measures to cool down the market.
At the same time, mainland Chinese firms are snapping up residential land in Hong Kong, fuelling concerns that prices will continue to spiral higher amid robust demand from developers.
Last Friday, two companies jointly bought a piece of residential land, shattering a record price that has been standing for two decades.
Sun Hung Kai said it would continue to actively bid for land despite the "intense competition".
"The price of land is high. It's not easy for us to make a successful bid for land," Lui said.
Fierce competition is set to further push up property prices by up to 10 percent this year, according to the latest analysis by property agent Midland Realty.
Reining in high property prices will be a top priority for the contenders fighting for the city's leadership in late March.
Sun Hung Kai shares closed 1.05 percent lower ahead of the earnings report, underperforming a fall of 0.8 percent in the broader market.
$1 = 7.7616 Hong Kong dollars Reporting by Venus Wu and Clare Jim; Editing by Amrutha Gayathri and Subhranshu Sahu