UBS: Mainland Commercial, Industrial Land Renewal Policy Removes Valuation Uncertainty, Greater Impact on HK Developers
I'm LongbridgeAI, I can summarize articles.UBS reports that new Mainland China policies on commercial and industrial land renewal remove valuation uncertainty, positively impacting the market. The rules set renewal prices at no less than 70% of benchmark values with a 20-year max term. This significantly affects Hong Kong developers holding older assets, as depreciation accelerates when remaining terms fall below 20 years. UBS estimates ~9% average GAV for covered developers has
UBS published a research report stating that Guangzhou and Shanghai have successively announced formal policies on the renewal of land-use rights for commercial and industrial land, marking the first systematic framework in Mainland China specifying renewal details. The policies stipulate that renewal prices shall be no less than 70% of benchmark land prices, with a maximum renewal term of 20 years. UBS believes the move removes uncertainty surrounding commercial property valuations, REIT spin-offs and physical asset transactions, generating a positive impact on the market.
The report noted that commercial land grants generally carry terms of 40 years, and asset valuation depreciation accelerates when the remaining term falls below 20 years. As Hong Kong developers entered the Mainland market earlier and hold older properties, they are more significantly affected. UBS estimated that among developers under its coverage, around 9% of total gross asset value (GAV) of investment properties on average have remaining land terms of less than 20 years. Among them, HANG LUNG PPT (00101.HK) -0.005 (-0.070%) Short selling $8.19M; Ratio 10.097% has the highest proportion at 35%; WHARF HOLDINGS (00004.HK) -0.320 (-1.501%) Short selling $16.08M; Ratio 37.176% accounts for 11%; SWIREPROPERTIES (01972.HK) -0.100 (-0.415%) Short selling $22.81M; Ratio 40.289% accounts for 10%; KERRY PPT (00683.HK) 0.000 (0.000%) Short selling $2.50M; Ratio 16.641% accounts for 6%; and LINK REIT (00823.HK) +0.260 (+0.676%) Short selling $28.25M; Ratio 12.188% accounts for 5%.
UBS analysis indicated that the Mainland REIT market already includes 48 commercial properties, with data showing capitalization rates are highly negatively correlated with remaining lease terms of properties. The bank believes developers can recycle capital through REITs or property transactions, and if valuation gains can offset renewal costs, it would positively affect share prices. The report cited Tianjin Joy City as an example, where early renewal extended the land term by 16 years and was estimated to lift property valuation by around 18%. (ad/u)(HK stocks quote is delayed for at least 15 mins.Short Selling Data as at 2026-08-12 16:25.)