Smaller property players call for sale of carved-up sites
Some developers suggest authorities auction divided plots to increase supply of new flats
With half of the city's new flats supplied by a few major developers, small to medium-sized property companies want more small plots auctioned off to help them compete against their bigger rivals.
They say smaller plots will increase the supply of flats by encouraging more players to come into the sector and helping to speed up construction.
Donald Fan Tung, chief operating officer of mid-sized developer Paliburg Holdings, hopes the government will divide more large sites for auction.
"Although the government is starting to split some big sites to allow more participants, it is not enough," Fan said.
"We have seen many small sites also attract bids from big developers. We can hardly compete with these cashed-up developers."
Paliburg was one of 12 bidders to compete for the Urban Renewal Authority's "Sneaker Street" commercial and residential project in Mong Kok last month.
The 26,673 sq ft site near Macpherson Playground is valued at between HK$2.5 billion and HK$3 billion and attracted the sector's big guns, including Cheung Kong (Holdings), Sun Hung Kai Properties, Sino Land, Henderson Land Development, New World Development and Wheelock Properties.
New World Development eventually won the site.
Big developers have even bought small sites on outlying islands.
Sino Land bought a 49,127 sq ft waterfront residential site in Peng Chau for HK$19 million in March, while Swire Properties won a tender for two low-density residential sites at Cheung Sha on Lantau for HK$360 million, or more than HK$5,500 per sq ft, in December.
Fan suggests the government offer more sites valued between HK$2 billion and HK$3 billion for auction, to meet growing demand from small- to medium-sized developers. He said the best way to increase land supply was to resume regular land sales.
David Ma, a director and general manager of Hon Kwok Project Management, shared Fan's view, saying the company, a subsidiary of developer Hon Kwok Land Investment, had been active in redeveloping old buildings in Hong Kong a decade ago.
"But it has become difficult for a small developer like us to continue our business in Hong Kong after the creation of the Urban Renewal Authority, which favours large-scale projects," he said.
Hon Kwok decided to phase out its Hong Kong business in 2001 and stopped all development projects here in 2004.
"We are still actively looking for redevelopment opportunities in Hong Kong through partnership," Ma said.
"But participating in a URA tender or government auction is not our top priority for land replenishment."
Far East Consortium International chairman David Chiu said he hoped the new administration would consider releasing more smaller sites, of about 10,000 to 20,000 sq ft, in the New Territories or in urban areas. Such sites could be sold for less than HK$1 billion, which would make them affordable to smaller developers.
For the past five years, Cheung Kong and Sun Hung Kai Properties have accounted for more than half the new flats sold in Hong Kong, while the remainder are sold by Sino Land, New World Development and Henderson Land Development, according to data complied by Centaline Property Agency.
This year, five of 23 sites sold through government and the MTR Corp were bought by small- to medium-sized developers. They include Emperor, which paid HK$180 million for a 38,837 sq ft site in Siu Lam, Tuen Mun, and CSI Properties, which won a 50,376 sq ft site in Kau To Shan, Sha Tin, for HK$532 million.
Yu Kam-hung, senior managing director of valuation and advisory services Greater China at CBRE, said more small developers in the market should help to boost the supply of flats.
"Enhanced competition may help the market to move more quickly. Major property developers will continue to aggressively bid for sites in good locations while small- to medium-sized developers may benefit from growing land supply in different locations," Yu said.
He agreed that the resumption of regular land sales would yield more flats.
"But we need to maintain a stable land supply to meet the needs of the market at an affordable level," he said.
Roger Nissim, an adjunct professor in the University of Hong Kong's real estate and construction department, said that rather than wait for developers to "trigger" sites from the application list, an effective way to speed up supply would for the government to immediately restart regular land auctions.
In 2002, the government decided to drop monthly land auctions in favour of an application list scheme.
"Whilst we have the current market situation with very high property/land prices it is always going to be extremely difficult for new players to enter the real estate business," he said.