Wheelock wins Kennedy Town tender at lowest price for Hong Kong Island since 2002

The fact that the tender has not been withdrawn shows that the government is committed to increasing supply, executive at Centaline Surveyors says
Average price per square foot is over 25 per cent lower than price for a small parcel sold in the same district in November: Midland Surveyors

Hong Kong property

Lam Ka-sing

Published: 10:00pm, 5 Jul 2023

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The government’s first land tender of the financial year has fetched the lowest price for Hong Kong Island since June 2002 and is more than 25 per cent lower than prices seen in November, amid prospects for further interest rate increases and a plentiful supply of new housing.

A subsidiary of Wheelock Properties won the tender for a site at the junction of Sai Ning Street and Victoria Road in Kennedy Town for HK$1.72 billion (US$219.86 million), according to the Lands Department. The plot is expected to yield about 450 flats, some with a sea view.

The site is currently occupied by a bus terminal, and the construction of a temporary terminal next to the site while the existing one on the plot is replaced by a new one during the construction of the project will prolong the development period.

“The average price per square foot at HK$7,071 is the lowest on Hong Kong Island since June 2002, which is likely to be related to the [plot’s] complex terms of land development, and the current uncertain economic environment,” said James Cheung, executive director at Centaline Surveyors. The development period of the project is nine years, which is longer than the six years of projects generally, and the risk is higher, Cheung added.

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Rising interest rates are weighing on the sector. Hong Kong Monetary Authority CEO Eddie Yue Wai-man said last month that a cycle of rising interest rates was far from over and that the de facto central bank had only paused rate hikes after 10 straight increases in its base rate since March last year.

“As a result of the interest rate hikes in the United States, interest rates are high and construction costs are rising,” Cheung said. And while mainland Chinese developers did not bid for the plot, local developers were very cautious in their bidding process, he added.

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In winning the bid, Wheelock beat Sun Hung Kai Properties, CK Asset Holdings, K Wah International Holdings, Great Eagle Holdings and a joint venture of Sino Land and China Merchants Land.

“The fact that the tender has not been withdrawn shows that the government intends to push the land to the market and is committed to increasing supply,” Cheung said.

The decline in the plot’s average per square foot price comes after a slide in the prices of lived-in homes in May, the first fall for this year, and the lowest number of property deals in five months.

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The average price per square foot is more than 25 per cent lower than the price for a small parcel sold in the same district in November, said Alvin Lam, director at Midland Surveyors.

“The government has most likely adjusted the reserve price [according to] market conditions,” said Lam.

“The group has rich experience in developing on Hong Kong Island and has launched many high-end residential projects in the same district,” said Stewart Leung, Wheelock’s chairman.

Wheelock’s Stewart Leung. Photo: Dickson Lee

“We are very familiar with the advantages and characteristics of this district. The experience will help us build the new project as the next landmark housing estate in the Western District.”

Leung told the Post that sales will only take place three or four years down the line, at the earliest, because of the longer development period of about nine years. Total investment in the residential development could amount to close to HK$4 billion, assuming construction costs of about HK$6,000 per sq ft, Leung added.