Small and mid-tier developers are unsettled by major operators joining land auctions for small sites The alarm bell rang for a circle of small developers when big player Sun Hung Kai Properties last week paid a higher than expected price for a tiny Tsuen Wan site at a government auction after a fierce bidding contest with another major developer, Sino Land. Small developers said the move by big developers, which already dominated the city's property sector, would make it more difficult for them to buy sites for development and eventually force them out of the market. They voiced their concern after Sun Hung Kai Properties paid HK$53 million - a record price for the area - for a 22,346 square foot residential site in Tsing Lung Tau at the September 12 land auction. The site can provide a gross floor area of only 8,938 sq ft. K Wah International chairman Lui Che-woo said: 'The high land price (paid by Sun Hung Kai) made it difficult for small developers to compete.' 'We expected only small or mid-tier developers like us would be interested in the site,' said Gary Wong Yiu-hung, sales and marketing general manager at Wang On Group, one of the bidders for the site. 'We were surprised that major developers were interested in the site. [Their forays] make it difficult for small or mid-tier developers to buy sites through land auctions.' Lanbase Surveyors director Chan Cheong-kit agreed. He said small and mid-tier developers have been facing the problem of land acquisition especially since major developers are aggressive in acquiring big and small sites. He suggested that small developers should look for property with value-added potential. Surveyor Albert So Chun-hin suggested small developers buy old buildings for redevelopment. 'Many individual owners of old buildings in Mid-Levels and Kowloon Tong are planning to put their flats up for collective sale. The sizes of the development sites are suitable for small developers,' he said. Developers have adopted various strategies to face the problem. As major developers are willing to pay aggressive prices, small players are willing to sell their sites to their big competitors rather than develop these on their own. Chuang's Consortium International bought old buildings for redevelopment at Babington Path in Mid-Levels last year and sold them to Wharf Holdings for HK$240 million. The developer made a profit of HK$62 million from the deal. Wang On Group sold a redevelopment site at Davis Street in Kennedy Town to Far East Consortium International for HK$149 million and made a profit of about HK$49 million within a year. 'We decided to sell the site because we could make reasonable profit,' said Gary Wong of Wang On Group. 'Our strategy is to acquire sites in the private market and buy old buildings. We have bought old buildings in Cheung Sha Wan that we will redevelop into commercial and residential buildings.' Many small developers are focusing on the luxury market. Mr Wong said: 'Buyers of luxury residential are willing to pay higher prices for the houses. If we improve the quality of our luxury project, the turnover is enough to cover the development cost and earn us a good profit.' Knight Frank Petty executive director Alnwick Chan Chi-hing said developers should shift their focus to commercial development or property investment instead of residential development. 'Small developers find it difficult to compete with major developers in the residential market because people prefer large-scale residential developments. But this doesn't happen in the commercial market. Demand for retail and Grade B and C office spaces is still strong,' he said. Billion Development used to have residential developments but bought only commercial or industrial sites in the past 12 months.