Following “pioneers” such as Vanke, Poly, and Greenland, an increasing number of mainland developers have extended their business reach to Hong Kong, becoming a significant investment force in the Hong Kong land market. According to statistics from some institutions, since 2011, the total investment by mainland developers in acquiring residential land in Hong Kong has reached HK$76.4 billion. If commercial land is included, the total investment has exceeded HK$100 billion. Particularly noteworthy is that in 2016, residential land acquired by mainland developers in Hong Kong accounted for 54% of the total residential land transaction value in Hong Kong that year, exceeding half for the first time.

According to statistics from the CRIC Real Estate Research Center, from 2011 to now, mainland developers including China Overseas, Vanke, Poly Property, Shimao, Mingfa, CITIC, MCC, Minmetals, and HNA have participated in public residential land auctions in Hong Kong, with a total of 23 transactions and a total investment of HK$76.4 billion. From only one mainland developer acquiring one residential plot in Hong Kong in 2011, to six mainland developers acquiring a total of seven residential plots in 2016, the number of investment projects and total investment by mainland developers in Hong Kong have increased year by year over the past six years. On February 24 this year, Longfor Properties, together with KWG Property, acquired a high-end residential plot at 136 Lee Nam Road, Ap Lei Chau, Hong Kong for a total price of HK$16.855 billion, setting a record for the highest total transaction price for a single land parcel in Hong Kong in recent years.

In terms of the proportion of investment amount, the influence of mainland developers is also growing. According to statistics by the reporter, in 2014, the amount of residential land acquired by mainland developers accounted for 49% of the total residential land sale amount in Hong Kong; in 2015, this proportion was 44%; and in 2016, this proportion reached 54%, exceeding half, and it was also the year with the largest investment by mainland developers in Hong Kong.

On the other hand, in the past few years, the influence of major local Hong Kong developers in the local residential market has been weakening. Data from JLL shows that the residential land acquired through bidding in Hong Kong by the seven major local developers, including Sun Hung Kai Properties, Cheung Kong Holdings, Henderson Land Development, Nan Fung Group, New World Development, Sino Land, and Wheelock Properties, has dropped from 45% of the total land sold in 2012 to 28% in 2014, and further fell to 22% in 2016. Recently, major local Hong Kong developers have also been overall outmatched by mainland competitors in bidding for MTR property development projects and Urban Renewal Authority development projects.

In terms of residential supply, JLL data shows that the proportion of projects by the seven major local Hong Kong developers in the total residential supply is estimated to drop from 85% in 2014 and 77% in 2016 to 53% from 2017 to 2019.

Mok Ka-kit, Senior Director of JLL's Hong Kong Investment Department, said that the seven major local Hong Kong developers collectively acquired only five residential land parcels in 2016, a significant decrease from ten in 2012, and their success rate in winning MTR property development projects, which have always been larger in scale, is also lower than before. Therefore, it is expected that the residential supply from major local Hong Kong developers will also decrease accordingly in the future. “According to our understanding, in the face of strong competition from mainland developers, local Hong Kong developers have already raised their bid budgets accordingly when bidding for land, but their success rate is still lower than before. As it is more difficult to replenish land reserves than in the past, local Hong Kong developers will be more reluctant to sell when launching new projects, and it is expected that new project prices will remain firm,” said Mok Ka-kit.

Regarding the phenomenon of mainland developers actively bidding for land in Hong Kong, Ji Yanxun, Head of Research and Consultancy at Knight Frank Greater China, believes that there is no need to be too surprised. “Many companies use Hong Kong as the first stop for overseas investment, and they are motivated to obtain the first foothold at all costs. Local Hong Kong developers have many reserves on hand, so they are not active in bidding up prices.”