Cheung Kong

Small firms face uphill battle for residential sites

PUBLISHED : Wednesday, 30 May, 2012, 12:00am
UPDATED : Wednesday, 30 May, 2012, 12:00am


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Small and medium-sized developers are less likely to win government land tenders in coming months, according to surveyors, who expect keen competition from larger developers for residential sites to be put on sale before October.

Secretary for Development Carrie Lam Cheng Yuet-ngor on Friday unveiled a list of eight residential sites that will be put up for tender between July and September.

Other than two small lots on Peng Chau, the sites are likely to fetch prices ranging from HK$1.57 billion for the smaller sites and up to HK$9.5 billion. They are spread across the New Territories, from Sha Tin to Tseung Kwan O, or in Yuen Long and Tsuen Wan, where two sites are above West Rail station projects.

Surveyors said these sites would prove too expensive for small developers, and their locations were not prime enough for them to develop luxury residential projects.

'As the government is expected to roll out more policies to provide subsidised housing in future, smaller developers have been focusing more on luxury residential properties which are supported by strong demand and offer higher profit margins,' said Ringo Lam Chun-chiu, valuation director for surveying firm A.G. Wilkinson & Associates.

Land parcels priced between HK$500 million and HK$1 billion would fit the appetite and budgets of small and medium-sized developers, Lam said, since they offered lower development risk than sites with higher lump-sum prices. But many of the sites up for sale between now and September were too large for small builders.

In the past few months, several small and medium-sized developers have shown new aggressiveness. CSI Properties beat 15 developers to buy a luxury residential site in Kau To, Sha Tin, for HK$531.5 million last week, or HK$10,550 per square foot of permitted gross floor area.

'Smaller and less experienced developers need a prime location for their projects so that buyers will be attracted to them irrespective of who builds the properties,' said Vincent Cheung Kiu-cho, national director at Cushman & Wakefield.

Cheung cited the example of Tai Cheung Holdings, which won a 46,715 sq ft luxury residential site in Repulse Bay for HK$1.67 billion earlier this month. It had to outbid 10 other developers, including the city's largest private flat suppliers, Cheung Kong, Sun Hung Kai and Sino Land.

'In this case, the developer can easily pre-sell the flats because it is at Repulse Bay. This can help it to cash in quickly,' Cheung said.

He noted that one of the sites going up for sale - the 460,700 sq ft West Rail site in Tsuen Wan (Bayside) - is so large it could fetch about HK$10 billion, and suggested the government could cut the site in two so more developers could afford to bid.

Lanbase Surveyor director Chan Cheung-kit also believes only the largest developers in the city will be able to buy the government sites being put for sale before October.

The two sites on Peng Chau, on which the buyers can build flats with a maximum gross floor area of 14,327 square feet and 55,973 square feet, might be small enough for the smaller developers, Chan said, but they would worry that they could not set aggressive selling prices because of the location, and that construction costs would be high.

Surveyors also expect large developers or consortiums of developers will bid for the huge waterfront land parcel in North Point and another site above Tai Wai station currently open for tender. They estimate they will sell for up to HK$10 billion and HK$1.36 billion respectively.