Hong Kong developers are tightening their purse strings, with many resisting paying high prices for development sites in contrast to mainland rivals who are bidding aggressively to establish a foothold in the city.
Since land prices started to correct in the third quarter last year, Sun Hung Kai Properties outbid 10 competitors and won a residential site in Ma On Shan for a lower-than-expected HK$1.83 billion, or HK$4,241 per square foot.
The price tag was 18 per cent less than a nearby site sold to Cheung Kong for HK$2.9 billion, or HK$5,160 per square foot in November 2012.
The market received another blow last Friday when the land premium being charged for MTR Corp's phase four Lohas Park in Tseung Kwan O came in at 15 per cent lower than phase three's HK$2,410 per square foot in 2007.
The trend indicates that land prices have dropped more sharply than home prices, which have eased just 4.3 per cent from their peak in March last year, according to the Centa-City Leading Index.
However, mainland developers like Poly Property, China Vanke, and China Overseas Land & Investment are paying high or record prices for residential sites, mostly in urban areas, so they can expand into the Hong Kong property market.
In March 2012 Agile Property vice-chairman Chan Cheuk-yin paid HK$700 million, or HK$21,350 per square foot, for a development site in Sai Kung, setting a record in the area. Last month, Michael Chan Sze-ming, the son of Chan Cheuk-yin, bought a site in Peng Chau for HK$21 million.
All told, mainland developers have spent nearly HK$17 billion snapping up seven local sites since March 2012 - six from government tenders and one from MTR Corp. As of March this year, Chinese developers accounted for 23 per cent of the government's HK$16.7 billion in land sale revenue.
China Vanke was again one of the 17 interested parties which submitted bids for MTR Corp's Lohas Park phase four development in Tseung Kwan O. Flats to be built on the site could yield a total of 1.31 million square feet and will enjoy a sea view.
The first three phases of Lohas Park, comprising 8,000 units, are being developed by a consortium led by Cheung Kong. The first two phases of 6,300 units have been sold, but the third phase has not been released for sale.
If phase four is won by China Vanke, it will break Cheung Kong's dominant role at the development.