Hong Kong flats sold through tender are likely to yield higher prices for developers
Whether Mount Nicholson or Wan Chai, flats sell for more when they are bid for
Sale by tender appears to be an effective way of boosting the price of flats in Hong Kong, from The Peak to Lohas Park, as opposed to the open market.
About 80 per cent of flats put up for sale through tenders have achieved record prices for their particular development, according to property information provider Dataelements, which tracks sales in the primary residential market.
“In some cases, units sold by tender could be 30 per cent to 40 per cent higher than those sold by price list,” said Derek Chan, the head of research at Ricacorp Properties.
Last week, the Mount Nicholson development sold a 4,242 sq ft four-bedroom flat on the 12th floor for HK$560 million, or about HK$132,000 per square foot. On a square-footage basis, that makes it the most expensive residence in Asia.
The same buyer paid HK$600 million, or HK$131,000 per square foot, for a 4,579 sq ft unit on the same floor, putting it in second place.
On Friday, another flat on the 10th floor sold for HK$500 million, or HK$116,945 per square foot, becoming the region’s third-most expensive flat.
All units in Mount Nicholson are sold through tender.
Tender sales, which were previously used for large units in prestigious locations, have been extended to secondary areas and small flats.
In October, Sun Hung Kai Properties sold a 1,066 sq ft unit in Wings at Sea in Lohas Park through a tender for HK$22.4 million, or HK$20,978 per square foot. On a square-footage basis, it was a record for Lohas Park.
Last week, a 399 sq ft unit plus a 377 sq ft terrace on the sixth floor of L’Wanchai sold for HK$11.6 million through tender. Its price tag translates into HK$29,073 per square foot, or equivalent to prices for units in Mid-Levels.
“Tenders will create competition among bidders who need to offer higher prices in order to win. A flat may be sold for HK$30,000 per square foot if developers opt for traditional ways of selling. But the same flat may sell for HK$35,000 per square foot if it is offered through tender,” said Vincent Cheung, Colliers International’s deputy managing director for Asia valuation and advisory services.
According to a Sales of First-hand Residential Properties Authority regulation, developers are required to release a price list at least three days ahead of the official sale date to allow prospective buyers to study the details of the project.
But units for sale through tender are not restricted by this rule.
Victor Lai Kin-fai, the chief executive of Centaline Professionals, said some developers might give an indicative price range to agents but will not announce a minimum price.
“In a strong market, units are likely to achieve high or even surprisingly high prices. But developers will also use tenders in market doldrums to test the water,” he said. “If developers are dissatisfied with the bidding prices, they will withdraw the tender sale.”