Poor residential site sales lead to market pessimism Poor site sales lead to market pessimism
Surveyors have revised down their estimates for next week's government auction of residential sites by as much as 20 per cent due to recent poor land sale results.
'The previous sale results have been worse than expected and have had quite a large impact on market sentiment,' said Vincent Cheung Kiu-cho, Cushman & Wakefield's national director for valuation and advisory services. 'Developers have become more prudent as a result.'
Based on the prices achieved, Cheung said, he had lowered his forecasts for prices for sites in Tseung Kwan O and Yuen Long by 20 per cent to HK$3.476 billion and HK$441.6 million respectively. The two sites, and a small plot of land in Sai Kung, will be auctioned on Tuesday. Two recent government sales of land plots - a luxury residential site in Kau To, Sha Tin, and a commercial-residential site in North Point's Oil Street - fetched less than the market had forecast.
'If the sales next week are poor, it means developers are pessimistic about the outlook for all property types, from luxury residential sites in the New Territories, mixed developments in the city centre, to mass residential projects,' Cheung said.
Of the three sites that will be auctioned, most attention will be on the 144,238 sq ft site in Tseung Kwan O. It will provide the buyer or buyers with total developable floor area of 792,898 square feet; as a condition of the sale, they must build between 960 and 1,010 flats.
According to five surveying firms polled by the South China Morning Post, the site is expected to fetch a between HK$3.33 billion and HK$3.96 billion, or HK$4,200 to HK$5,000 per square foot in terms of gross floor area. Last year, a nearby site was snapped up by Sun Hung Kai Properties after a fiery auction for HK$3.37 billion, or HK$4,628 per sq ft.
'It's located near the Tseung Kwan O MTR station and there will be residential buildings, office towers and a hotel in the area, which is similar to the developments at Kowloon station. Therefore, the site should draw a good value and response,' said Patrick Chow Moon-kit, Ricacorp's head of research.
Since there were a few more sites yet to be sold in the area, Chow believed the auction would attract not only developers who already had projects in Tseung Kwan O, but also new entrants who wanted to build an empire there.
For the site in Tan Kwai Tsuen Road in Yuen Long, the government requires the developer to build at least 170 flats in blocks of no more than four storeys. The site has a maximum gross floor area of 120,471 square feet. The site is expected to sell for between HK$378 million and HK$510 million, or HK$3,138 to HK$4,250 per buildable square foot.
Victor Lai Kin-fai, chief executive of property consultancy firm Centaline Professionals, said the restrictions on the number of flats developers could build would dampen sales as it affected developers' flexibility and marketability.
The Kau To site auctioned this month was the first to have attached a stipulation that the buyer build a minimum number of flats. Many market watchers said the sale result was poor because of this requirement, as it limits the size of flats.
But Lai said the impact of such a restriction on the Tseung Kwan O site should not be as severe as at Kau To, because it is in a new development area which is suited to smaller flats.
Centaline has nonetheless cut its original estimates for the Tseung Kwan O site and Yuen Long by 9.2 per cent and 12.7 per cent respectively, and Lai said the tightening of controls on mortgage loans was a key reason for a quieter market.
Unlike the Tseung Kwan O and Yuen Long sites, the Sai Kung site was triggered for sale after an applicant guaranteed it would place a minimum bid of HK$86 million. With a site area of 25,833 sq ft, surveyors believe the site is worth HK$90.8 million to HK$183 million, or HK$7,500 to HK$15,115 per sq ft.
Alnwick Chan Chi-hing, executive director of Knight Frank, said he maintained his forecast for this site because he believed the applicant could be an end-user. It might attract competing bids from small- and medium-sized developers.
Alvin Lam Tsz-pun, a director at Midland Surveyors, said the uncertainties about the course of the world economy and the sale of many land sites would undeniably affect developers' purchasing sentiment and power.
The firm is reviewing its original estimates for the prices the sites will achieve.
960
The minimum number of flats the government requires to be built at the Tseung Kwan O site. The maximum is 1,010
