Tung Chung site fetches HK$3.4b in lacklustre sale

PUBLISHED : Wednesday, 12 May, 2010, 12:00am
UPDATED : Wednesday, 12 May, 2010, 12:00am

The big hitters of the Hong Kong property scene stayed out of a lacklustre government land auction yesterday, a sign they are waiting on the sidelines to see if efforts to cool housing prices will succeed.

The residential site in Tung Chung was sold to Nan Fung Development, a low-profile, privately owned company, for a price that was 5 per cent less than the lower end of market expectations.

The 282,017-square-foot piece of land went for HK$3.42 billion or HK$2,378 per square foot, far below market forecasts of HK$3.6 billion to HK$5.04 billion.

Analysts believed the auction could be a turning point for the market, and revised downwards by 15 to 30 per cent their forecasts of prices at auctions over the next two months.

The government suspended regular land auctions in 2002 because the economic downturn was depressing prices. But last month it announced plans to auction two sites - in Ho Man Tin and on the Peak - by July, signalling a move to lift supply on concerns that prices were getting beyond the reach of many people.

Nan Fung and New World Development were the only bidders for the site yesterday, compared with six for a site in Tseung Kwan O in February.

Bids had to be coaxed yesterday, with auctioneer Graham Ross warning 11 times that the site might be withdrawn as the offer failed to meet the government's reserve price.

Although the auctioneer lowered the bid increment to HK$20 million from HK$40 million on a request from Nan Fung, no developers except the eventual winner were willing to join the bidding.

The company took 32 minutes to win the site with the 16th bid. In February, Sun Hung Kai Properties took 20 minutes to secure the Tseung Kwan O site with the 68th bid.

'The auction is a little bit unusual than the others,' Ross said.

'[The auction] was a bit like pulling teeth. It was very painful,' said Nicholas Brooke, the chairman of Professional Property Services. 'The message [from developers] is that it takes two to tango. If the government changes the rule of the game [by increasing land auctions], fine. But there is a price consequence.'

Polytechnic University professor Eddie Hui Chi-man called it the worst response to a land sale since the application list system that replaced regular land auctions was introduced in 2002

'The below-expected result ... indicates that the government's austerity measures are starting to take a toll on the market,' Hui said.

The government took steps in its budget in February to rein in property prices. It raised stamp duty on transactions of more than HK$20 million and ordered the sale of sites on the land application list if they are not triggered for auction in the next two years.

After the land auction yesterday, about 40 per cent of the flat owners in Caribbean Coast, a development near the auctioned site, cut the asking prices of their flats by 5 to 10 per cent, according to Tony Poon Chi-kwong of Centaline Property Agency.

Midland Realty chief analyst Buggle Lau Ka-fai expects property sales to drop 20 per cent to 24,000 deals in the second quarter compared with the first quarter, while property prices would fall.

Nan Fung will spend up to HK$3 billion to develop the site. The company has more than 130 projects under its belt, including some in Hong Kong and on the mainland.