The year of 2022 is ending. The property market is not significantly changed. The market observers are still very wary for the future development of the economic environment. Although the pessimistic mood is widespread to the public, Cheung Kong Asset Holding Limited, the pioneer of an investor, made a great decision suddenly to purchase a vast plot residential land in Kai Take, Kowloon. This massive 8.7 billion Hong Kong dollars investment shocked the market and gave the implication for all the investors.
Cheung Kong is highly respected by the investors for its perfect timing to buy or sell of the investment property. In early of 2017, Cheung Kong sold out 75% of undivided shares of The Centre in Central to the consortium for 40.2 billion dollars. This consortium consists of China company and local investors, and they are veterans in handling big property deal. Unfortunately, the latest transaction price of The Centre has already come down from 33,000 to 27,000 dollars per square feet. It is equivalent to twenty percent lower than the original price. Furthermore, the rental of this property has been declining thirty percent since this property changing hands five years ago. Nowadays, the yield return of this property is only about 1,4%. This massive deal was a remarkable achievement for Cheung Kong, and it proved its superb capability to close an investment deal in critical moment.
Keung Kong did another big deal five months ago by selling the whole lot of the 21 Borrett Road, a high-rise luxury apartment complex consisting of 152 residential unit, to a Singaporean consortium by 20.7 billion dollars. Keung Kong showed its deal maker capability again in the declining market. Until now, the opening door policy is coming back to China, but it will not change dramatically the downturn of prestigious house market soon. The heavy indebted listing China property companies are still suspending for trading in Hong Kong Stock Exchange. The wealthy Chinese investors have suffered tremulously losses in the past three years. The sources of big spenders have been depleted. On the other hand, local wealthy investors are also cautious and seem not much interesting to invest in the luxury house market. Cheung Kong understood this realistic situation, so the management sold this property in a whole package to an overseas buyer. As a result, the company saved huge resources by selling this property individually and secured the future income in the next two years. If the company sold this premises unit by unit basis, it would not be sold out in the coming five years.
The land which Keung Kong acquired recently is small and medium size residential usage. The accommodation value of per square feet of this plot of land is about six thousand Hong Kong dollars. The basic costing including interests and construction fees of this property development is about four thousand dollars per square feet. The pre-sale price may reach twenty thousand dollars when this premises will be completed three years later. It means that the profit margin is one hundred percent. If this estimation is correct, the present value of the urban residential units is already at the lowest point.
Keung Kong sold the investment offices and luxury house project but brought the small and medium size residential land. It reveals that Keung Kong’s investment preference is general residential market. As a common investor, one should get the implication from the strategy which Keung Kong is being employed.