Observers have been trying to explain the unexpected outcome of last Tuesday's government land auction, at which Cheung Kong (Holdings) and KWah International bid much higher than predicted for two residential sites. While sceptics believe the developers' aggressive bidding was aimed at rejuvenating the slowing housing sector, some market watchers suggest they have made a mistake - again. Last week's auction evoked memories of leading developers being forced to make huge provisions for their projects after aggressively buying sites at the market's peak in 1997. At the time, Cheung Kong and Hutchison Whampoa paid $6.06 billion for a government-auctioned site in Hunghom, now occupied by the Harbourfront Landmark residential development. The crash in the property market forced them to write billions in provisions on the development. In 1998, Cheung Kong and Hutchison made a $1.5 billion provision for the Caribbean Coast residential project in Tung Chung, for which they had won development rights from the MTR Corporation in 1997. Sun Hung Kai Properties, defeated by Cheung Kong in last Tuesday's fierce bidding for a Ma On Shan site, wrote off $1.1 billion on its Park Island development in Ma Wan and Ocean Shores phase three in Tseung Kwan O, to which it committed at the market's peak in 1997. Henderson Land Development recorded a write-off on its Tai Po luxury project Beverly Hills, as did Sino Land on its Island Resort in Siu Sai Wan. Sino Land led a consortium that paid a record $11.82 billion for the site in 1997. Eddie Hui Chi-man, associate professor of the building and real estate department at Hong Kong Polytechnic University, said: 'Everyone makes mistakes; big developers are not an exception.' Merrill Lynch analyst Clifford Lam said: 'The aggressiveness of developers was never a good benchmark for property prices. If history is anything to go by, we might see some kind of provision in the next three years.'
