Hong Kong land prices set to rise further as developers rush to buy land
Hong Kong land prices will keep rising as developers rush to buy sites amid strong property sales and intense competition, industry experts say.
Against the backdrop of a market forecast that primary market transaction values will reach HK$200 billion this year, developers need to replenish their land banks if they want to maintain their market share and continue to capitalise on the strong buying sentiment.
"We have seen many sites which attracted more than 10 bidders in government tenders. Competition will certainly be heating up," said Thomas Lam, the head of valuation and consultancy at Knight Frank.
He noted that local construction firms were also joining the bidding.
"Land prices will see an upside trend as developers have no choice but to offer aggressive bids if they want to win the tender," Lam said.
Victor Lai Kin-fai, the chief executive of consultancy Centaline Professionals, said transactions in the primary residential market have been running high since the middle of last year. This could encourage developers to be more aggressive in land acquisition.
"Sitting on strong cash reserves, property firms have to speed up the pace of construction and step up efforts to market new projects in order to drive higher turnover," he said.
Midland Realty chief economist Buggle Lau Ka-fai believes primary transaction value will reach HK$200 billion this year due to the increased number of big-ticket deals.
Lau's estimation is 13 per cent higher than last year's HK$177 billion.
On June 17, Henderson Land Development paid HK$4,620 per square foot for a low density residential site in Tuen Mun. It was about 24 per cent higher than the HK$3,720 per square foot paid by Sun Hung Kai Properties for a site in the same district last week
Henderson Land beat off eight bidders to win the site on Kwun Chui Road for HK$3.62 billion, while SHKP defeated 13 bidders to secure a government site at Hoi Wing Road for HK$1.31 billion on June 10.
Last month, Citic, which trumped 18 bidders, paid a record HK$6,502 per square foot for a residential site in Lok Wo Sha Lane, Ma On Shan. Its winning bid for the site, which could yield a total gross floor area of 225,900 sq ft, was HK$1.46 billion.
In April, Sino Land outbid 17 competitors to win a luxury residential site at a surprisingly high price in terms of per square foot in Sai Kung. Sino Land paid HK$18,000 per square foot, 48 per cent higher than the market expectation. The developer's winning bid was HK$609 million.
Although developers have to dig deeper into their pockets for land acquisition, Lai said they would market their new projects at higher prices since the positive news would spur buying interest.
"Developers and individual home owners will no doubt use the latest land result as a new benchmark in the area," he said, adding the high bids were also due to the closed tender system.