Hong Kong Tycoons Are $3 Billion Richer on Lam’s Housing Policy

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(Bloomberg) -- In her annual policy address Wednesday, Hong Kong’s embattled leader Carrie Lam vowed to help citizens get on the property ladder.

While the jury’s still out on whether changes to mortgage loan value limits and converting farmland for public housing will do that, there’s already one group prospering -- the city’s real estate tycoons.

The combined wealth of six of Hong Kong’s biggest property billionaires has jumped 3.3% since Lam’s speech as shares of developers rallied. That gives the group, led by CK Asset Holdings Ltd.’s Li Ka-shing and Henderson Land Development Co.'s Lee Shau Kee, a total net worth of $98.7 billion.

Hong Kong Tycoons Are $3 Billion Richer on Lam’s Housing Policy

Making $3.2 billion in a few short hours isn’t bad, even for people as mega rich as these executives. Yet it’s the sort of windfall an ordinary Hong Kong resident could only dream of.

Widening inequality has long contributed to tension in the city, and nothing exemplifies the divide between the haves and have-nots better than the sky-high cost of residential property. Hong Kong’s real estate has for years been ranked the world’s least affordable -- median property prices climbed to 21 times median household income in 2018, according to Demographia, an urban planning consulting firm.

Even allowing first-time home buyers to borrow up to 90% of a property’s value to a maximum of HK$8 million ($1 million) -- from HK$4 million previously --- has raised questions over how useful it will actually be.

Land Purchases

Under the new measures, to buy an HK$8 million apartment borrowing 90% via a 30-year mortgage would require a monthly salary of HK$57,838, according to mortgage broker mReferral Corporation (HK) Ltd. Hong Kong’s median monthly income is just HK$17,500, government data show.

The Hang Seng Properties Index, which tracks the city’s major developers, advanced 2.3% Wednesday and was up as much as 2.2% Thursday.

It was also Lam’s proposal to acquire 700 hectares of land -- a significant amount of which would have to come from developers -- for public housing that spurred the stocks. The compulsory purchase of land is expected to enhance the value of farm land held by the companies.

“Hong Kong developers are trading at a large discount, but how much room the rally has depends on the state of the protests from here,” said Raymond Cheng, an analyst at China Galaxy International Financial Holdings Ltd. “The policies announced yesterday were a signal that though Carrie Lam wants to see housing prices decline, it won’t be a total free fall.”

Wednesday’s policy address was Lam’s effort to alleviate social discontent amid the former British colony’s worst political crisis. What started as opposition to a bill to extradite suspects to mainland China has morphed into a general outcry against China’s increasing influence over the city. Government officials and business elites have acknowledged growing inequality -- particularly high housing prices -- as the main cause of frustration.

©2019 Bloomberg L.P.

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