Hong Kong developers raise prices of flats by up to 70 per cent as record Kai Tak land sale boosts confidence
Analysts say the surge has been fuelled by a land auction at the site of the city’s former airport which fetched HK$25.16 billion, a record price for a residential plot
Hong Kong developers are raising the prices of their unsold units by as much as 70 per cent in a sign that the world’s hottest property market is a long way from running out of steam.
Kerry Properties has priced a flat at The Bloomsway in Tuen Mun at HK$16.14 million (US$2 million), or HK$18,724 per square foot, up 68 per cent from two years ago, while a 964-square foot unit at K. Wah International’s K. City, in Kai Tak, has increased 13 per cent from when it first went on the market in March 2017.
Analysts said the surge has been fuelled by a recent land auction which fetched HK$25.16 billion (US$3.21 billion), a record price for a residential plot. Sun Hung Kai Properties paid HK$17,776 per square foot for the parcel in Kai Tak, the site of the city’s former airport, which means an apartment complex built on the site may fetch at least HK$32,000 per square foot.
“We call it a benchmark impact, and it is based on the location, the large size [of the plot] and the developer,” said Sammy Po Siu-ming, chief executive of Midland Realty’s residential division. “It is not a mainland company making a bid, which would have brought doubt about whether it is just speculation. It is Sun Hung Kai, a traditional, big local developer. People think that Sun Hung Kai’s big investment means the company has belief in a continued increase in the city’s property prices.”
Records on the government’s website show that 23 developers have either released new units for sale or revised the prices of ones already on the market since May 15, when the historic Kai Tak deal was made.
Two of those projects are in Kai Tak. Wheelock’s Oasis Kai Tak issued a new price list for 76 units on May 21, while K. Wah International updated the prices of 56 units at K. City on May 16.
Kerry Properties will put six of its units at The Bloomsway, Tuen Mun, on sale on Friday.
“The record-high land prices are stimulating ‘buy’ sentiment,” said Derek Chan, head of research at Ricacorp Properties. “On the back of that, developers have increased their prices and speeded up the release of new units recently.”
On the first weekend after the Kai Tak sale, buyers snapped up about 250 units in four projects with prices ranging from HK$19,975 to HK$28,235 per square feet.
The heat has extended to the secondary market too. According to Po, the first five months of the year have seen an 8 per cent increase in the price of pre-owned homes in Hong Kong.
“Such a rapid increase, I have not seen in years ,” he said.
Hong Kong's home prices have increased every month for the last two years, the longest stretch for a property bull market in a quarter of a century.
An index of lived-in home prices rose 3.7 points, or 1.01 per cent, to 368.4 in March, according to data released by the Rating and Valuation Department. A flat smaller than 430 square feet on Hong Kong Island, the city’s central area, costs an average of HK$16,103 per square foot while the price tag for one in Kowloon is about HK$13,763 per square foot.
Analysts say that with the recent heat in the market, it is possible to see an annual average price increase higher than the 10 per cent they forecast at the start of the year.