Auction to act as barometer

PUBLISHED : Monday, 22 August, 1994, 12:00am
UPDATED : Monday, 22 August, 1994, 12:00am

TOMORROW'S auction of three lots of land, which is expected to generate between $1.3 billion and $1.5 billion for the Government, is seen as the latest gauge of market confidence in the territory's real estate market.

The auction comes just after last week's decision by the big banks to lift interest rates by 50 basis points and is only the second land sale since the Government took action to curb property prices on June 8.

A 164,151-square-foot residential site in Tai Po will be the focus of attention.

It is expected that the auction results will act as a barometer for the capital value of luxury houses in the area and give an indication of market sentiment in the home market throughout the territory.

The site, which is zoned for low density residential development with a potential floor area of 271,576 sq ft, is located next to a site bought by Sino Land for a record price of $2.14 billion - or an accommodation value of $4,480 per sq ft - in early March, when the property market was strong.

However, the uncertain market sentiment over the past few months has led property analysts to make conservative forecasts.

The lowest projection is $968 million, representing an accommodation value of $3,564 per sq ft - far below the record of $4,480 per sq ft achieved by Sino Land five months ago.

''Market sentiment is completely different from the situation in March,'' said William Wong, a partner at real estate consultants Brooke Hillier Parker.

He added that his company's forecast was conservative even though the Tai Po site has a better location than that of the site bought by Sino in March.

His remarks were echoed by Raymond Ho Kai-kwong, an assistant director of property consultants Vigers Hong Kong, which has predicted a price of $980 million for the Tai Po site.

Mr Ho said he expected investors in the domestic residential market to remain cautious even though higher-than-expected results were obtained in bidding for two Tai Po residential sites at an auction on July 26.

He was also worried that last week's rise in interest rates would psychologically dampen buying sentiment.

Investment sentiment in both the residential and office segments has been seriously undermined by the Government's measures to curb home prices and a recent decision by large banks to tighten mortgage lending.

However, there are some optimistic forecasts. Michael Clarke, managing director at Chung Sen Surveyors, said his firm predicted the site in Tai Po would be sold for between $1.1 billion and $1.2 billion, representing an accommodation value of between $4,161 per sq ft and $4,400 per sq ft.

Mr Clarke said the Tai Po site would attract major developers.

The other two sites on offer at tomorrow's auction are a 36,059 sq ft godown site in Kwai Chung and a 26,210 sq ft site for industrial or godown use in Yuen Long.