Developers' stocks are better investments than property, says Henderson Land Development (0012) chairman "Uncle Four" Lee Shau-kee - adding that some could double in value in the medium term.
Lee - dubbed Asia's Warren Buffett - cited a query by a friend. "She asked me whether she should buy a home with HK$10 million her boyfriend gave her," he said. "She may enjoy a capital gain of 20 or 30 percent in two or three years. But she could make an even better return in stock investment by getting margin financing, as then her capital could rise to HK$40 million.
"The short supply in recent years caused home prices to rise, but that will reverse in the future. In just six months, as many as 10,000 private housing units will be on sale and, together with public and subsidized housing, I don't see home prices growing further by the year end." Lee is also not optimistic on the luxury housing market. When the economy is strong, rich mainlanders spend generously but this is not the case anymore, he said.
On a visit to Beijing as chairman of the Hong Kong Pei Hua Education Foundation over the weekend, Lee said he recommended that his friend buy stocks for a better return - especially Hong Kong property stocks which have a big discount to their asset value.
Speaking to The Standard's sister paper Headline Daily, Lee said the European debt crisis is unlikely to be resolved for months. "But certainly the storms will calm in two to three years. By then, those property stocks with 50-60 percent discount will recover and probably double from now."
Among blue-chip developers, New World Development's share price has the biggest discount to its 2011 book value at 67 percent, followed by Henderson land at 51 percent. This is the first time Lee has recommended Hong Kong property stocks. An outspoken equity investor, in the past he has boasted of his investments in mainland stocks such as CITIC Pacific (0267) and Country Garden (2007).
The incoming administration of Chief Executive-elect Leung Chun- ying has vowed to increase land supply and help the less advantaged buy homes. Lee suggested that, to implement such policies, the land-use classification of some unused agricultural plots should be converted to land for homes without charging land premiums.
These homes could be priced at about HK$1 million and sold to the less well off, he said.
Assuming a plot ratio of five, about 1 million square feet of agricultural land could accommodate more than 10,000 units, with construction finished in two years.
Lee said Henderson is willing to surrender some of its farmland in a bid to reduce the number of people living in undersized, subdivided rooms and cage homes.
He also suggested the government provide 20-year mortgages to homebuyers. "Assuming the interest rate is 3 percent, the borrower will repay some HK$5,000 for every one million of loan, even those who are earning the minimum wage can afford this."
Asked about his expectations of the incoming administration, Lee said anyone can rule Hong Kong - which he described as a "golden egg with a handful of surpluses" - provided the ruler uses public money properly.
He supported Leung's competitor, Henry Tang Ying-yen, in the race for chief executive, but he and Leung are friends and will "chat when we meet."
On the city's growing rich and poor gap, Lee called on Hong Kong's rich to donate 2 percent of their annual income for the disadvantaged, given the relatively low tax rate in the city.