China Vanke, the mainland's biggest property developer by market value, has made its first foray into Hong Kong's property market by acquiring a residential site on the Tsuen Wan waterfront in partnership with New World Development.
The consortium beat seven players, including Hong Kong's heavyweights Cheung Kong (Holdings) and Sun Hung Kai Properties, to win the tender for the West Rail Tsuen Wan West station project at a cost of HK$3.43 billion, or HK$5,088 per buildable square foot.
The winning bid was 10 to 27 per cent above analysts' estimates, which ranged from HK$2.7 billion to HK$3.12 billion.
Analysts said the China Vanke deal signals that mainland players could gradually challenge the dominance of local tycoons in the city's property industry.
Ringo Lam Chun-chiu, valuation director at the surveyors AG Wilkinson & Associates, said: "It is a sign that the mainland's big property players have started implementing active strategies in Hong Kong."
Vanke Property (Hong Kong), a subsidiary of China Vanke, will take a 20 per cent stake in the winning consortium, with the rest owned by New World.
The development, on the last waterfront site in a prime location near the West Rail in Tsuen Wan, could provide a total gross floor area of about 675,000 square feet. The winning consortium could build two towers comprising 894 flats, of which 520 units would have to be 538 sq ft or smaller. Property agents estimate the selling price of completed flats could be more than HK$10,000 per square foot.
Adrian Cheng, an executive director and joint general manager at New World Development, said the first collaboration between the partners marked a good start.
New World, which is listed in Hong Kong, said it would continue to study the possibilities of further strategic partnerships with China Vanke in Hong Kong and on the mainland.
Lam said: "Hong Kong is an open market, and mainland players have large market capitalisations. It is possible they will further strengthen their presence in the city."
But time will tell whether or not they can challenge the dominance of tycoons in the city's property market, he said.
Alan Chiang Sheung-lai, the head of residential property on the mainland for the consultancy DTZ, said the recent decision by China Vanke to convert its foreign currency-traded B shares into H shares showed its determination to internationalise.
He said he expected more mainland companies would consider this channel to expand overseas.