Outlook dims on Kai Tak’s waterfront land as Hong Kong’s Northern Metropolis plan and land conversion add to city’s supply glut

Five plots of housing land at Kai Tak, valued at a combined HK$71.3 billion (US$9.15 billion), may fail to live up to expectations when they go on sale, analysts said
One of the plots was sold last week at a discount of 10.8 per cent from its purchase price in 2018

Hong Kong land sale

Lam Ka-sing

Published: 7:30am, 8 Dec 2021

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A distressed sale last week at Hong Kong’s former Kai Tak airport site has clouded the outlook of the city’s property market, as an expected glut of residential land weighs on prices.

Five plots of land at Kai Tak, valued together at up to HK$71.3 billion (US$9.15 billion), may fail to live up to expectations when they go on sale, analysts said. The parcels - yet to be converted from commercial land into residential usage - can yield about 5,800 average-size flats, according to the rezoning proposal in Hong Kong’s 2021-2022 budget announced in February by Financial Secretary Paul Chan Mo-po.

Another factor that puts a cap on prices is the city government’s plan to develop the Northern Metropolis in the New Territories, where at least 900,000 homes may be built over the next 20 years to accommodate 2.5 million people and alleviate Hong Kong’s crowdedness.

“Land prices may soften, rather than be on the rise,” said Lau Chun-kong, managing director at Colliers International and Chairman of the Land Policy Panel at the Hong Kong Institute of Surveyors (HKIS). “The likely supply in Kai Tak and the Northern Metropolis will relieve upwards pressure. The [slump] in the stock market will also make developers more prudent in making their bids.”

Hong Kong’s Land Supply Over the Next 30 Years. SCMP Graphics

Kai Tak, where Hong Kong’s main airport operated from for more than seven decades until 1998, measures 323 hectares (798 acres). It is an important part of the transformation of eastern Kowloon into a central business district to sustain the city’s development, first outlined in 2011 by former Chief Executive Donald Tsang.

Since then, Kai Tak has grown into an upscale residential area, especially on the narrow strip of land protruding into Victoria Harbour where the former airport runway was, as it offers seafront view on three sides. KWG Group Holdings and Longfor Group have launched their Upper Riverbank apartments, where a four-bedroom ground floor flat with a garden sold in October for HK$79 million.

The runway site of Hong Kong’s former Kai Tak airport, now converted into residential, commercial and retail space to form an important part of the transformation of East Kowloon into a central business district. Photo: Martin Chan.

A number of Chinese developers – exemplified by the voracious asset buyer HNA Group before it went bust in January – snapped up Kai Tak’s plots at record prices in late 2016 and early 2017, driving land prices to between HK$15,000 and HK$18,000 per square foot.

The former airport’s transformation puts the impetus on Kowloon Bay and Kwun Tong nearby to drive the area’s development as a central business district, said Leo Cheung, adjunct associate professor at the University of Hong Kong.

“If proper provisions of infrastructure have not been sufficiently provided, pressure on land prices is expected,” he said.

Prices have corrected since those heady days. Kaisa Group, one of the Chinese developers now buckling under debt, last week sold a plot of Kai Tak land for HK$7.9 billion (US$1 billion) in cash and assumed debt, a discount of 10.8 per cent to the price that a distressed rival paid in 2018.

Kaisa’s Area 4B Site 4 was bought by a venture backed by New World Development and Far East Consortium International. Next to it, Area 4C Site 4 is valued at HK$14.5 billion, while Area 4C Site 5 may be worth HK$11.8 billion, according to Alex Leung, senior director at CHFT Advisory And Appraisal.

Two of the five rezoned housing land face the Victoria Harbour at the end of the former runway, with the most breathtaking view among all other residential parcels in Kai Tak.

“Land prices could be very volatile [in Kai Tak], depending on changes in market condition and sentiment,” and could “easily vary by more than 10 per cent,” Colliers’ Lau said.