Mainland developer China Vanke sets low prices for first Hong Kong housing estate in Tuen Mun
Average price of first batch of 231 units at Le Pont development cheaper than public housing in district
China Vanke, the mainland’s second-largest developer by sales, has priced apartments at its first wholly-owned residential development in Hong Kong’s Tuen Mun starting at HK$9,878 (US$1,265) per square foot – cheaper than 30-year-old subsidised housing in the area.
The average price for the first batch of 231 units at the 1,154-unit Le Pont development is expected to be HK$11,073 per square foot, after factoring in discounts of as much as 16 per cent, Vanke Property (Hong Kong), a wholly-owned subsidiary of the developer, said on Friday.
Looming vacancy tax is prying long-held flats from Hong Kong developers who kept them locked away for future appreciation riches
The apartments, sized from 343 sq ft to 779 sq ft, are expected to fetch between HK$4.24 million and HK$8.43 million, or HK$9,878 to HK$13,043 per square foot.
“The selling price is even lower than that of some tiny public flats sold in the area,” said Jacky Yeung, a sales director at Centaline Property Agency’s Tuen Mun branch. He said transaction prices for small flats of less than 200 sq ft at the 30-year-old Leung King Estate, a public housing estate, were between HK$12,000 to HK$14,000 per square foot.
“Most young couples and singles have been forced to buy these old apartments, which are smaller than car parks, for less than HK$3 million, as nothing was available for this budget in the private residential market. Now, they will certainly return to private homes if the prices continue to fall,” he said.
China Vanke’s launch price is the lowest in the past two years, since Nan Fung Development released its flats at Ori development in Tuen Mun for HK$7,712 per square foot in July 2016.
The Le Pont price announcement comes after news that about 900 units will go on sale in Hong Kong during the three-day Mid-Autumn Festival this year, the most in one go for more than five years, as property developers try to offload stock amid souring market sentiment and an imminent increase in interest rates.
The apartments at Le Pont have also been priced 22 per cent below Napa, a new project nearby that sold for HK$14,000 per square foot, and 10 per cent below used apartments in Tuen Mun that go for HK$12,800 per square foot, according to Sammy Po, the chief executive at Midland Realty’s residential department.
“The stunningly low prices are likely to hit the secondary residential market in Tuen Mun, as home seekers will be lured to the new project,” said Po.
Joseph Tsang, managing director at JLL, said Le Pont had more than 1,100 units, which could take time to sell.
“Developers need to generate a good start, with strong momentum, to sell fast. Held units will be penalised,” he said, referring to the vacancy tax on empty, unsold flats hoarded by developers.
The tax was announced in June by Chief Executive Carrie Lam Cheng Yuet-ngor but has not yet been implemented. Completed homes left vacant for more than six months after receiving an occupation permit will be liable to a levy of about 5 per cent of the property’s value.
Vanke Property (Hong Kong) bought the Le Pont site for HK$3.8 billion in 2015, or HK$4,541 per square foot. This gives it room to still make a profit.
Taking into account construction costs and interest expenses, an estimated HK$4,000 per square foot, JLL’s Tsang said the total development cost of Le Pont would be about HK$9,000 per square foot. “The project is still profitable,” he said.
China Evergrande Group paid the highest amount per square foot – HK$8,300 – ever recorded in Tuen Mun in January, when it bought a site that is expected to yield 1,982 apartments at 8 Kwun Chui Road from Henderson Land Development for about HK$6.5 billion.
This means the company will need to sell the apartments in the development for about HK$16,600 per square foot to generate a reasonable profit of 15 per cent, said surveyors.
Elsewhere, the land premium set for phase 2 development at Ho Man Tin Station, which could yield 1,000 homes, is about HK$7.48 billion, or HK$11,709 per square foot, according to a source with knowledge of the tender document issued by the MTR. The tender for the project will close at noon on October 22.
It will break the previous record of HK$10,576 per square foot set by phase 2 development at Wong Chuk Hang Station in 2017.
But the source said the MTR would ask for a lower profit sharing ratio of 25 per cent for the phase 2 development at Ho Man Tin Station, down from 35 per cent in phase 1.