Kowloon plot sells for under HK$10,000 per sq ft for first time since November 2016
A plot in Kowloon has sold for under HK$10,000 per square foot, the first time urban land has been sold for such a low price in nearly two years.
Poly Property Group, the Hong Kong-listed arm of state-owned China Poly Group, won the tender for the 39,612 sq ft plot on Ko Chiu Road in Yau Tong for HK$3.3 billion (US$420 million) or HK$9,257 per sq ft, the Lands Department announced on Wednesday.
In the process Poly Property became the first mainland-based developer to win government land since last November.
“The price is at the lower end of market expectations,” said Alvin Lam, director at Midland Surveyors, adding that developers have become cautious in setting the tender price as they see market sentiment weakening. “When developers make investment decisions that involve billions of dollars, they will be concerned about the market sentiment and cycle.”
The last time a plot sold for less than HK$10,000 per sq ft was in November 2016 when Wheelock Properties paid HK$7,729 per sq ft for won land in Sin Fat Road in Kwun Tong.
Valuers expected the price to range from HK$3.2 billion to HK$4.6 billion for the Yau Tong plot.
Lam said the headwinds that have dampened recent market sentiment include the US-China trade war, rising mortgage rates, downbeat stock market, capital outflows and worries that the market could reverse its upward trend.
He noted that the plot comes with certain restrictions, such as a cap on the height of buildings and major hillside maintenance to prevent landslides that will increase cost and time for the development.
Shimao Property was the last mainland-based company to win a plot in Cheung Sha Wan last November as part of consortium with four local developers.
Lam said the return of mainland-based developers in bidding for land signals their renewed interest in Hong Kong’s government land.
“As Poly wraps up with the sale of its Vibe Centro development in Kai Tak, it has capital for reinvestment,” said Lam. “It is also more confident after its experience in developing a project in east Kowloon.”
At a plot ratio of nine times, Poly can build 500 to 600 flats small to medium size flats, according to Thomas Lam, senior director at Knight Frank.
“Flats can sell for about HK$20,000 per sq ft and the total development cost could be about HK$5 billion to HK$6 billion,” Lam said.
Poly beat major local developers such as Sun Hung Kai Properties, CK Asset Holdings, Henderson Land Development and New World Development.