The competition could intensify at tenders for Hong Kong’s residential plots as developers replenish their land banks amid a recovering property market, with the tug of war testing their financial discipline as they bid for parcels at a “noticeable premium”, according to S&P Global Ratings, though some analysts believe that the return of confidence is warranted given robust demand for housing units.
The credit-rating agency also forecast a relatively modest residential market recovery, which could potentially limit the pricing strategies of developers as new projects are launched in future.
“Rated developers handled Hong Kong’s property downturn deftly by trimming investments and bolstering balance sheets,” S&P said in a report on Wednesday. “Now the question is whether they will throw caution to the wind as demand revives.”
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The rating agency said that the coming land auctions could test market discipline as “we see a risk of intense bidding because Hong Kong’s property market is known for its pronounced upcycles”.
“Any purchases of land at inflated prices could be a long-term risk,” S&P said.
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Winning bids for four recent land tenders came above the upper end of market estimates of between 7.1 and 37.9 per cent, S&P said.