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Kenneth Ko

Developers of several key residential projects coming on sale in the next few months face losses in the negative market.

 Analysts said at least four projects would have no choice but to set prices below development costs.

 The biggest loser probably would be the 592-unit Dynasty Heights development in Lung Ping Road at Beacon Hill, being built by Sino Land, DBS Land of Singapore, China Overseas Land & Investment, Chinachem Group and Nan Fung Development.

 The consortium bought the site for $3.94 billion, or $5,413 per square foot, at a government auction in December 1993. Analysts estimated development cost above $8,000 per sq ft, including construction and interest expenses.

 Estate agents said it appeared impossible to recoup that investment at today's market prices.

 They expected maximum selling prices of apartments in Dynasty Heights could be $5,500-$6,000 per sq ft and those of houses $8,000 per sq ft.

 The project has six, nine-storey towers of apartment buildings, 11 towers of terraced duplexes and five towers of high-rises ranging from 13 to 19 storeys.

 The Greenfields, a 480-unit project in Yuen Long by 13 developers, also was expected to sell at losses.

 The consortium - comprising leading SAR developers such as Cheung Kong (Holdings), Sun Hung Kai Properties, New World Development and Sino Land - bought the site for $510 million, or $1,436 per sq ft, at a controversial auction in May 1994.

 A group of 12 developers bought another residential site in Luen Wo Hui, Fanling, at the same auction for $2.04 billion, or $1,773 per sq ft.

 Analysts estimated the total development cost of The Greenfields at more than $3,000 per sq ft, but agents said the project would sell below that figure.

 The Greenfields has secured pre-sale consent and can be released at any time.

 The Luen Wo Hui project, comprising 1,680 units, is still awaiting pre-sale consent approval and is expected to sell in a few months.

 Analysts estimated its development cost at more than $3,500 per sq ft, compared with expected selling prices of well below $3,000 per sq ft.

 A property company executive said it was difficult for developers who bought land at high prices several years ago and needed to sell now or in coming months.

 'It will be lucky if they do not end up losing money,' she said, adding that developers would have to sell even at losses to cash in.

 Indosuez W I Carr Securities analyst Douglas Sung said small and medium-sized developers would be the hardest hit as big developers' average land-bank costs were lower.

 He said the number of loss-making projects coming up for sale was not great.

 Analysts also expressed concern over the profitability of HKR International's 160-unit La Fontaine in Tai Po, with an estimated development cost of $4,000 per sq ft. The project is expected to go on sale soon.

 Several residential projects released for sale earlier also saw losses.

 They included Sino Land's Majestic Park in To Kwa Wan, China Overseas' joint-venture Dragon View in Ho Man Tin and Lai Sun Development and Hong Kong Parkview Group's joint-venture Tycoon Place in Tai Po.

 Analysts expected developers' future profit margins to drop substantially to 10-15 per cent.



Residential projects face forced sales below cost