Only Time Can Tell If Tycoon Chan Is Guilty of Sour Grapes Or Is Going to Have the Last Laugh on His Rivals

To see a Hong Kong tycoon's fresh comments upon mainland China's deep-valley property market

Not so long ago, Hong Kong developers thought they were going to strike gold with mainland China's property and joined the stampede to build up land banks. Notable among them was Sino Land with its HK$4.4 billion auction win in Chengdu, followed by Wharf (Holding) with an even higher HK$7.24 billion.

Consider what happened next: most mainland property stocks have fallen more than 50 per cent from their peaks on worries that the central Chinese government will move to cool off the red-hot property sector.

We could not put it better than Hang Lung Group and Hang Lung Properties chairman Ronnie Chan Chichung, who vowed to spend US$4 billion in building his property empire but lost out in one of the high-priced Chengdu auctions.

In his letter to shareholders this week, Mr. Chan points out that previously sceptical Hong Kong players seem to have cast off all restraint in an effort to grab a slice of mainland property, pushing prices sky high.

He grumbled about a certain Hong Kong developer who bought a commercial plot in a thriving city in western China at a unit price that was some 20 times higher than Mr. Chan's Shenyang Doumugong property bought one year earlier.

"The two projects are very similar in almost every aspect," wrote Mr. Chan.

"Just as striking is the fact that the price paid by our Hong Kong friend is more than the totality of all of our land purchases in the mainland including those of our two Shanghai projects."

There is definitely a limit to developer's tolerance for land costs, he argued. So Hang Lung did not buy any land in the past six months and is patiently waiting for the market to get back to normal.

"Fortunately, the central government stepped in towards the end of last year and brought things back to a more sensible state. Some of those who bought land only a few short months ago might be regretting their decisions."

Only time can tell if Mr. Chan is guilty of sour grapes, or is going to have the last laugh on his rivals.

(Note: the aforesaid article is from the South China Morning Post of 29 March 2008)