Raymond Kwok (left) and Thomas Kwok, vice chairmen of Sun Hung Kai Properties Ltd, speak at the company's interim results press conference in Hong Kong yesterday. Sun Hung Kai Properties Ltd, the world's largest builder by market value, said fiscal first-half underlying profit rose a more-than-expected 44 percent on wider margins on real estate sales and increased rental income. David Paul Morris/Bloomberg News

Announcing a huge improvement in its first half results yesterday, the blue chip developer Sun Hung Kai has expressed its opposition to the idea that the government should resume building subsidized flats under the Home Ownership Scheme (HOS) to curb soaring home prices.

The objection was raised by Thomas Kwok, vice-chairman of the city's largest developer by market value, after he announced a 44 percent gain in the developer's underlying profit for the six months ended December 2009.

Soaring home prices have thwarted home-purchase plans of many low- to middle-income households, fueling calls for the resumption of the HOS.

Under the scheme, which has been suspended since 2003, households that cannot afford private-home purchases can buy flats developed by the government at subsidized prices.

However, Kwok said the suggestion is a bad idea, worrying that any active intervention by the government in the housing market can trigger a slump in the property market like the one during 1997 to 2003.

He said the government's massive production of HOS flats after 1997 contributed to the previous property slump, which saw many homeowners suffer from negative-equity mortgages for years.

Moreover, the resumption of the HOS is of little help in curbing rising home prices in the short- to medium-term, as it will take about five years to produce the first batch of HOS flats, even if the scheme is resumed now, he said.

"So I believe the best solution to ease the tight supply in the residential market is for the government to increase land supply," he said.

"It is unwise (for the government) to build HOS flats with the land that should be used for construction of public housing estates," he said.

While opposing the idea of resuming the HOS, Kwok supports the suggestion that the government should build more public housing estates for low-income households.

For the first half, Sun Hun Kai's underlying profit excluding revaluation gains from investment properties rose to HK$6.51 billion from HK$4.54 billion a year earlier mainly because of stronger property sales and higher rental income.

Including property revaluations, net profit jumped 19.7 times to HK$14.34 billion from only HK$692 million a year ago.

The stronger property sales were partly attributable to wider margins after residential property prices in the city surged 27 percent on average last year.

As for concerns about any property bubble, Victor Lui, an executive director at the developer's marketing unit, said he sees no bubbles in the local residential market.

(HK Edition 03/12/2010 page2)