The aggressive move by Sun Hung Kai Properties (SHKP) to settle a basket of land premiums with the Government has aroused talk among analysts of the property market bottoming out. Last week, the property giant reached consensus with the Government for land premiums on seven sites for an aggregate HK$2.1 billion, the largest land-premium deal this financial year. Analysts were mixed as to whether this meant the developer believed the property market had bottomed out or not. John Corrigall, Deputy Director of Lands, said the Government had made the land premium offers for a basket of seven development projects. This was the first collective premium payment for a basket of projects in the four years since he had taken the post, and this indicated SHKP was confident about the future, he said. But Mr Corrigall said the Government had not given a discount to the developer for the bulk charge. The seven projects were in different locations and all were calculated individually, he said. Mr Corrigall said some of the land premiums of these projects had been under negotiation for years. Talks on the project in Yau Tin East Road, Yuen Long, started two to three years ago. However, the Government recently made seven offers of premiums simultaneously and the developer accepted last week, he said. He expected other developers to be encouraged by the SHKP action. The Government has ongoing discussions with other developers and he expected to seal deals worth hundreds of millions of dollars by the end of the financial year. Mr Corrigall said SHKP had signed the land-premium agreements and paid a 10 per cent deposit. The balance would be completed within three months. The income could be booked in this year's account. Although he denied the Government had made concessions for SHKP to increase land revenue, he said 'the offer was made after [the] September 11 [terrorist attacks in the United States] and the amount had been reduced according to the market situation'. He declined to disclose the breakdown of individual charges until the deal was completed. Secretary for Planning and Lands John Tsang Chun-wah recently expected the Government's full-year land revenue to be HK$7 billion to HK$9 billion, far below the HK$27 billion target. ABN Amro property analyst Anton Kwang did not consider the SHKP decision a positive signal. He said the decision was largely driven by an urgent need to prevent production shortfall in 2004. He said SHKP could not afford severe production and pre-sale slippage caused by pending premium settlements. Regardless of whether prices had bottomed, he said, SHKP would agree on premium deals if it did not expect a drastic fall in prices. However, Dao Heng Securities analyst Eric Yuen said the commitment by SHKP was a sign of confidence in the long-term recovery of the residential market because some of the projects were to be completed in or after 2005. He said the move by SHKP would enhance the confidence of the small to medium-sized developers. The HK$2.1 billion premium was for mainly residential projects and SHKP had to spend more than HK$20 billion to develop these projects in four years, most of them to be completed in three years. The developments could provide about 9,500 residential units, 710,000 square feet of office space and 570,000 sq ft of retail area. Apart from the Yau Tin East Road residential development, SHKP also agreed on premiums charged on residential developments at Fu Tei in Tuen Mun, Yeung Uk Road in Tsuen Wan, Yunnan Lane in Yau Ma Tei, Olympic Station Development Package Three in West Kowloon and a shipyard redevelopment in Cheung Sha Wan. Millennium City phase five in Kwun Tong is the only commercial development in the seven projects. Thomas Kwok Ping-kwong, vice-chairman and managing director of SHKP, said: 'The fact that we have reached consensus on such a substantial sum for land premiums . . . is a clear demonstration of SHKP's faith in the local property market.' He said with the strong economic growth on the mainland, new business opportunities and added commercial momentum as a result of China's entry to the World Trade Organisation, and low interest rates in Hong Kong, the likelihood of a further slide in the property market was minimal. 'As such, this was the most appropriate time to finalise the agreements,' he said. Graphic: proj04gwz
