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BRICKS & MORTAR

Prospective Hengqin buyers enter a zone of uncertainty

A residential project sprouting up amid the grasslands will test investors' risk appetite

PUBLISHED : Tuesday, 10 September, 2013, 12:00am
UPDATED : Tuesday, 10 September, 2013, 2:47am

Hengqin was a sleepy, laid-back island, hardly noticed by anyone as next-door neighbour Macau and its bustling casinos stole the limelight. But that all changed after it was designated a new economic zone with Nansha in Guangzhou and Qianhai in Shenzhen.

Yesterday, the Commerce Ministry's Shenzhen office said Guangzhou's Baiyun International Airport would join the three new zones to form a pilot free-trade zone in Guangdong. The plans are subject to State Council approval.

In Hengqin, land prices have surged to record levels since plans were unveiled to transform the island - formerly known for its oyster beds - into a tourism, creative/cultural, research and health care hub, with the goal of attracting up to 30 million visitors a year.

But what is there to see today in Hengqin? Hardly anything, judging from my visit to the island three weeks ago. The first thing that greeted me was a vast grassland amid which a solitary residential project was being built. Close to the checkpoint at Lotus Bridge, which connects the island to Macau, the half-built project, Sea of Dreams, will be the first development to be offered for sale.

Analysts say the launch price and sales outcome will serve as a guide to the outlook for the island's property market. The project will offer 1,800 units, with sizes ranging from 87 square metres to 220 square metres each, and 2,700 car parking spaces.

Mainland media reports said the developer was expected to offer the first batch of flats at 25,000 yuan (HK$31,400) per square metre, 66 per cent higher than the 15,000 yuan per square metre flats are fetching in Xiangzhou, Zhuhai's central area.

As Hengqin is not covered by the central government's home purchase restrictions, Sea of Dreams is clearly targeting overseas buyers, including those from Hong Kong and Macau.

Investors in search of new alternatives must decide whether to enter Hengqin now or wait until adequate infrastructure is ready. What is prompting Huarong Real Estate to price its units so high? Apparently, the firm is factoring in anticipated improvements in access to the island. But these are more than three years away.

In July, a nearby commercial-residential site was sold for 15,874 yuan per square metre to Guangdong Keshanghui, a subsidiary of the Guangdong Hakka Trade Union. Adding 8,000 yuan per square metre for construction cost, the project's development cost could reach 23,000 yuan per square metre. Guangdong Keshanghui would need to offer the units at close to 30,000 yuan per square metre to make a reasonable profit.

The local government is in talks to introduce a 24-hour border checkpoint, which will encourage buyers from Macau, where average secondary market home prices are HK$63,130 per square metre, double what flats at Sea of Dreams could go for.

sandy.li@scmp.com

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