HONG KONG, Feb 28 (Reuters) - Property developer New World Development expects house prices in Hong Kong, among the most expensive in the world, will be stable despite the epidemic outbreak, given the strong demand.
The company’s executive vice-chairman Adrian Cheng told an earnings conference that the financial city’s economy is being hit harder by the coronavirus than SARS, but he added that he is confident the the market will recover just as it did in 2003.
Cheng’s comment echoed those of commercial property developer Hysan Development last week, which said it is “facing one the biggest crisis periods in recent history” in terms of the impact on its business.
“I’m cautiously optimistic. Even during the epidemic, there’s sill a very strong demand, looking for a time and opportunity to go into the market,” New World’s Cheng said.
Hong Kong private home prices in January were 4.7% lower than the peak in May 2019, as the emergence of the coronavirus further clouded a property market already hit hard by anti-government protests last year.
Apart from home sales, developers’ rental income from retail, hotels and offices have also been pressured by U.S.-China trade tensions.
Now, retailers are launching themselves into a rare battle with developers for deeper and longer-term rental cuts.
In the first half ended in December, New World Development recorded a 27% drop in underlying profit to HK$3.9 billion ($500.53 million), mainly due to a lack of new property development project completions in Hong Kong.
Its department stores and hotel businesses fell due to the protests’ impact on tourism. Cheng expected the company’s hotel occupancy rate to decline further this year.
Including the investment properties’ fair value impact, overall group net profit plunged 90% during the period, as valuers were concerned over the rental outlook in the city.
On Thursday, bigger rival Sun Hung Kai Properties said it expected revenue from its retail and hotel portfolios will see further reductions in the short term.
“Should the latest epidemic linger for a longer while, its adverse impact on the group’s property sales and earnings will be felt in the next two years,” the developer said in an earnings statement.
Its first-half underlying profit ended in December was down 2.3% to HK$13,422 million.
$1 = 7.7917 Hong Kong dollars Reporting by Clare Jim; Editing by Louise Heavens
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