Hunghom sale below forecast points to big revenue shortfall
The property market has been dealt another blow after a large commercial site in Hunghom was auctioned off at HK$655 million.
The Government received about HK$788.5 million from yesterday's auctions, which included two small residential sites. The figure is substantially below the amount analysts expected.
The figures mean the Government has raised land revenue of HK$2.16 billion from auctions and tenders since April. Even with an estimated HK$1.7 billion from lease modifications and land exchanges, land revenue is well short of the Government's HK$27.35 billion target for this financial year.
The selling price of the 106,994-square feet Hunghom lot - bought by Cheung Kong - was below expectations of between HK$760 million and HK$989 million. The accommodation value of HK$510 per square foot was 46 per cent below the HK$942 per square foot average of a neighbouring commercial site bought by Sino China Enterprise in August.
Lands Department chief estate officer Paul Tam Ming-tak argued that the office floor value of the site sold yesterday should be HK$613 per square foot, taking into account the negative value of the 175,453 sq ft public carpark required to be built on it.
Hampton Victoria Properties director Simon Chow agreed that the carpark had a negative value because of oversupply in the area but said the Lands Department, knowing the insufficient demand, for carparks there, should not have required it in the lease.
Cheung Kong (Holdings) deputy chairman Victor Li Tzar-kuoi said the site it acquired was more expensive than the waterfront lot sold in August because it required extra costs for infrastructure and had less of a seaview.
The Hunghom lot, which can provide a total floor space of 1.28 million sq ft, was released from the reserve list after an unnamed developer pledged to pay a minimum price deemed acceptable by the Lands Department.
However, the price was settled before the September 11 attacks and analysts had feared a pull-out and price renegotiation by the committed developer.
Government auctioneer Alexander Paton said there had been no price renegotiation and the opening price of HK$600 million was the developer's offered price upon application.
Mr Paton said there were no other applications for land on the reserve list. He dismissed the idea of a suspension of land sales, saying the Government would continue to provide land according to schedule.
Meanwhile, surveyor Tony Chan Kwan-sang said the transaction prices for the two residential sites were not low, indicating people had been too pessimistic over the impact from last month's attacks.
However, he said moves by big developers to bid for small sites might also be aimed at supporting prices, otherwise their rental properties could suffer lower revaluation, affecting their refinancing ability.
A coalition equally owned by Sino Land, New World Development and Manhattan Realty bought the 35,489 sq ft Piper's Hill site for HK$110 million. A 52,324-sq ft Sai Kung lot was sold for HK$23.5 million to private developer Glory Profit.
The auction figures will reinforce worries of a much larger-than-expected fiscal deficit for the Government.
UBS Warburg property analyst Franklin Lam said this year's fiscal deficit would be a 'big number, but this year will be a one-off event' because next fiscal year's deficit situation would improve, with the Government finally fixing the problems with the housing market by suspending the Home Ownership Scheme. He forecast land sale receipts this year would only reach HK$6 billion.
Cheung Kong's shares yesterday edged up 50 HK cents to HK$65.50. Most property counters saw little movement. Henderson Land Development was up 10 HK cents to HK$24.35 while Sun Hung Kai Properties gained HK$1.15 to HK$50.25.
