Sun Hung Kai reports slowdown in operations

Hong Kong's efforts to contain rising property prices have slowed the growth of Sun Hung Kai Properties Ltd, the largest property developer in the city.

Sun Hung Kai reported a drop in earnings and a slowdown in full-year profit growth following Hong Kong's restrictive measures to quell speculation.

It earned US$1.6 billion from its property sales in Hong Kong, 7.4% lower than the US$1.8 billion a year earlier as the government further tightened policies on home sales to curb price hikes last year.

Profit excluding property revaluations rose to US$2.80 billion for the full year ended June 30 from US$2.77 billion a year earlier, a rise of just 1.1%. Sun Hung Kai generates over 90% of its revenue from its Hong Kong business; the rest from mainland China.

Higher rents for new leases and renewals improved net rental income by 14.5% to US$1.2 billion last year from the previous US$1.1 billion. This offset weak property sales and helped attain a second successive record performance in terms of annual profit before taxes.

The company held 47 million square feet of land in its reserves in Hong Kong as of June. Joint Chairman and Managing Director Thomas Kwok said the company will continue to look for investment opportunities in Hong Kong and that that Sun Hung Kai ". . . will not be confrontational with the government by hoarding its land banks, but will speed-up the construction pace of properties in conjunction with the government's measures."

"The crux of the housing policy is to guarantee a sufficient land supply, but the land sales will need to be adjusted in accordance with the economic situation and market demand," said Kwok.

His brother, Raymond, who is also Joint Chairman and Managing Director, expects several rental properties on the mainland that are under construction at the moment to rake in rental income of as much as US$258 million every year in the future.