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SCMP Reporter

SINO Land went on a bull run yesterday, paying $4.4 billion for residential properties at a government auction.

  A third site in Tuen Mun was sold to Hang Lung Development for $650 million.

  Analysts said the prices were well above industry forecasts, reflecting the bullish property market in Hong Kong.

     But the land sales failed to boost Hong Kong stocks, which closed sharply lower. In fact, some brokers said prices fetched at the auction were too high. They said it may prompt developers to raise funds through the stock market with rights offers, which could hit share prices.

 Sino Land set a record by paying $5,600 per square foot on the accommodation value (AV) of the Farm Road property in Kowloon, which it purchased for $2.260 billion.

  The previous record AV price was $5,413 per sq ft, also paid by Sino Land for a site in Lung Ping Road in Kowloon in December. The site cost the company $3.94 billion.

  Property experts also expressed surprise that Tai Po Town Lot 137 fetched such a high price. That lot was secured by Sino Land for $2.14 billion.

  The final site, in Tuen Mun, was snapped up by Hang Lung for $650 million. Property experts said this price was also well above their predictions.

  Government land agent Nigel Burley, after putting down his gavel, said: ''The correct word I am groping for is 'astonishing'.''      Bidding for the Farm Road property began at $1.3 billion, and after a relatively slow start rocketed past the $2 billion mark. It was finally secured by Sino Land after a fierce contest between seven bidders.

  The site, located at the junction of Farm Road and Ma Tau Wai Road, measures 84,787 sq ft and was previously valued at between $1.1 and $1.2 billion with an estimated AV of $2,725 per sq ft.

  According to Julie Baldwin, director for valuation at First Pacific Davies, Sino Land will have to sell flats for about $7,500 per sq ft to break even. Brand new flats in that location were selling for $6,500 per sq ft, she said.

  Bidding on the Tai Po Town Lot property was almost as frenetic, with a clutch of developers once again being beaten out by Sino Land, who won the race with a bid of $2.14 billion.

  Analysts had predicted this 279,797 sq ft lot would sell for between $1.3 and $1.65 billion. The AV reached at yesterday's auction was $4,480 per sq ft.

  The $650 million bid by Hang Lung Development for the third smaller site also outpaced the pundits. The estimated price had been between $400 and $450 million.

  Hang Lung paid an AV of $2,323 per sq ft and it is estimated that it will have to charge $3,500 for a return on its investment.

  Richard Ellis' director of investment Michael Hollington said the current British-Sino dispute had little impact on the prices.

  ''The politics have been ignored,'' he said.

   ''What this says is that the market is extremely strong and there is a lack of supply. This reflects the dynamics of the market. The Government should release more land.''   According to First Pacific Davies, the high prices had increased the likelihood of further mortgage lending restrictions in Hong Kong.

  Ms Baldwin said: ''Despite recent warnings from the banking commissioner that mortgage lending may need to be further restricted because of an over-heating market, developers [at yesterday's auction] were bidding competitively, and pushed prices to levels that mean values need to increase a further 50 per cent over the next two years if developers are to make their usual profit.

    ''Developers clearly feel that political forces now have little impact on the market and are confident that there are sufficient purchasers in the market prepared to pay the increasing prices despite further likely mortgage restrictions.'' 



$4.4 billion spree by Sino Land