Hong Kong property

Hong Kong property experts ‘shocked’ at record sale result for Kai Tak area site

Residential site near the city’s former international airport was tendered Wednesday for HK$8.84 billion, more than double analysts’ expectations

PUBLISHED : Wednesday, 02 November, 2016, 9:16pm
UPDATED : Thursday, 03 November, 2016, 11:08am

A government land site in Kai Tak was tendered at HK$13,500 per square foot on Wednesday, raising HK$8.84 billion in total, and smashing a previous record for the area set two years earlier.

The price far exceeded analysts’ expectations, as it was more than double the HK$6,530 per sq ft China’s Poly Property paid to acquire a similar site in 2014, the prior price record for a land sale in the area.

“I am completely shocked ,”said Joseph Tsang, managing director of JLL Hong Kong, referring the land sale result. “The market is crazy, we have to be careful.”

“When a residential project in the same area is being sold at HK$15,000 per square foot, how can a bare land site be sold for HK$13,500 per sq ft? It is impossible,” Tsang said, referring to the recent sale of residential development One Kai Tak developed by China Overseas Land & Investment.

The Lands Department said the Kowloon site was awarded to Hongkong Island Construction Properties Company, which was formerly known as Hillview Golf Travel. Founded in 2004, the company operates golf course in China. The auction drew sealed bids from 20 developers.

Property agents said HNA Group, the acquisitive mainland Chinese conglomerate, was rumoured to be the controlling group behind the winning bid.

HNA Group is involved in aviation, real estate, financial services and tourism and also owns Hainan Airlines, China’s fourth-largest airline.

In October, HNA announced plans to acquire a 25 per cent stake in Hilton Worldwide for US$6.5 billion. During the same month it also agreed to buy eight golf courses in the northwestern US state of Washington for US$137.5 million.

HNA’s spokesperson declined to comment on the Kai Tak deal.

“I really don’t understand why the winning buyer paid such a high price. As far as I know others submitted bids between HK$8,000 and HK$9,000 per sq ft,” JLL’s Tsang said.

He expected developers who have residential properties in Kai Tak will take the land sale as a reference and adjust prices upwards at time of sale.

“The land sale is the latest example that mainland companies are in a rush to flow capital out of China as the yuan devalues and the mainland government introduces policies to tighten the [domestic] property market,” said Thomas Lam, head of valuation and consultancy at Knight Frank.

Lam, had predicted the plot would sell for HK$4.25 billion to HK$4.58 billion. He now expects the developer will turn the site into a luxury residential development with finished units to be offered at more than HK$20,000 per sq ft.