First site for small to medium-sized flats could fetch HK$2b

PUBLISHED : Saturday, 01 January, 2011, 12:00am
UPDATED : Saturday, 01 January, 2011, 12:00am

Hong Kong's first site earmarked for small or medium-sized flats was put up for sale yesterday.

Developers have until February 18 to bid for the site in Yuen Long, at the junction of Yuen Long On Lok Road and Tai Kiu Road. The site covers 132,828 sq ft and could generate a total gross floor area of 664,139 sq ft.

According to the tender document, the developer will be required to build not less than 960 flats, of which 800 must be between 377 sq ft and 431 sq ft in saleable area and the remainder between 431 sq ft and 646 sq ft in saleable area.

Surveyors believe the Yuen Long site can fetch HK$2 billion, or HK$3,000 per sq ft. Such a price would reflect developers' new-found caution in the wake of the government's new rules on floor area and its recent steps to rein in property price rises.

'Developers will be unlikely to submit aggressive bids given that it is the first site put on sale with restrictions for small flats,' said Victor Lai, managing director at Centaline Surveyors. 'They don't know what the sale response will be for flats without a grand lobby and luxurious recreation facilities.'

Taking into account construction costs and interest expenses, he estimates the winning bidder or bidders will have to sell the flats for HK$5,000 per sq ft to generate a reasonable profit. That implies the development will be dominated by flats costing HK$2.5 million to HK$3 million each.

Midland Surveyors director Alvin Lam noted that flats at Yoho Midtown in Yuen Long were selling for HK$5,800 per square foot in the secondary market and that flats at nearby New Yuen Long Centre were selling for HK$4,888 per square foot.

Lai said the site valuation would also be affected by new rules limiting the size of the common area of buildings. Under the new rules, features such as balconies, utility platforms and clubhouses - previously exempt from gross floor area calculations - should not exceed 10 per cent of the gross floor area of a development. Developers have been known to inflate the saleable floor area by 20 to 50 per cent to generate more profit by exploiting floor-area concessions in return for building such features.

Cheung Kong (Holdings) yesterday indicated its interest in bidding for the site, while Swire Properties said it would not participate.

Lam, of Midland Surveyors, expects the winning bidder will build four 30-storey blocks.

Financial Secretary John Tsang Chun-wah in his budget speech said the government would increase the supply of land for construction of small to medium-sized flats to take some of the heat out of the property market. Chief Executive Donald Tsang Yam-kuen has promised to liaise with the Urban Renewal Authority on the construction of more small and medium-sized flats.

The URA will put 3,400 flats on the market in the next five years. They comprise a 68-unit project at Baker Court in Hung Hom, a 1,200- unit development at Lee Tung Street in Wan Chai, and projects in Mong Kok, Kwun Tong and Sai Ying Pun.

Condition of sale

The minimum number of flats the developer will be required to build is: 960