Few bidders for former quarters
High investment risk has kept most developers away from the tender for the former government quarters in Caldecott Road near Piper's Hill in Kowloon.
Cheung Kong (Holdings), Wheelock Properties and Nan Fung Development were the only companies to submit bids yesterday. New World Development, which took on a similar development at Wylie Court in Ho Man Tin, was conspicuous by its absence.
The market response was even worse than when the first tender for the Caldecott Road site was put out in 2005 and attracted six bids. That tender was later withdrawn as the offers failed to meet the government's reserve price.
The latest result was also unexpected in the light of recent aggressive bidding for luxury residential sites. Last September, the tender for the government's two residential blocks at Winfield Building in Happy Valley received nine bids.
Charles Chan Chiu-kwok, managing director at Savills Valuation and Professional Services, said the poor response was due to the limited upside potential in the area and high investment risk.
'The average price of new housing in the area is still less than HK$10,000 per square foot. This is rare in the luxury residential market. The growth in prices there has not been substantial in last few years,' he said.
According to Centaline Property Agency, property prices of nearby Caldecott Hill and The Caldecott range between HK$6,318 and HK$7,690 per square foot.
The high investment risk is tied up in the history of the 42-year-old building. In 1998 the government sold two of the 48 units, which means only 46 flats and 46 car parking spaces are included in the tender put out by the Government Property Agency.
This in turn means the winning bidder will have to get consent from the two owners if it wants to renovate the 46 flats for resale, or get Lands Tribunal approval to force a sale by auction of the two units if the whole site is to be redeveloped.
'Developers have to bear a high investment risk for the project.' Chan said.
The total saleable area of the 46 flats is about 125,626 square feet, with each averaging about 2,700 square feet. Surveyor Albert So Chun-hin estimated the properties are worth up to HK$1.01 billion or HK$8,000 per square foot.
The result of the tender will be announced by April 16.