Hong Kong Developers Step up in China

The slowdown in China’s property market took its toll on the domestic appetite for development land this year, with mainland Chinese developers scaling back acquisitions. Many of the major players have withdrawn from the market almost entirely, as residential sales plummeted and refinancing difficulties persisted. At the same time, this decline has provided an opportunity for others — notably developers from Hong Kong — to strengthen their foothold.

Government sales of land for the first eight months of 2022 fell by 43% versus the same period a year ago, according to data from the National Bureau of Statistics of China. This can be largely attributed to a fall-off in demand from the leading domestic developers. The 50 biggest Chinese developers collectively spent CNY 1.1 trillion (USD 171.2 billion) over the 12 months through August, MSCI Real Assets data shows. That’s 38% lower than their average annual spend from 2016 to 2020.

The 10 biggest Hong Kong developers, meanwhile, increased their spend by 32% above the prior average annual investment level (CNY 435.6 billion over the 12 months through August). And another major player, New World Development Co. Ltd., recently announced plans to increase its land-acquisition activity on the mainland.

Access to financing proved key

This divergence illustrates that the mainland drop-off may have more to do with financing than a loss of confidence. The slowdown in residential sales and tightened financing conditions have affected mainland developers much more adversely, but those still able have actively bought land. For example, China Poly Group Corp., one of China’s biggest developers, which has mostly avoided the negative spotlight over the past two years, increased its activity over the past 12 months.

China’s enormous property market may be slowing down, but some have seen opportunity more than risk.