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Hong Kong property
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Will Hong Kong developers pass savings from low land prices on to homebuyers? Don’t hold your breath, insiders advise

  • History shows that bargain land prices do not necessarily translate to cheaper homes
  • If anything, the opposite is true, as current and expected home prices act as an important indicator for developers when they are bidding on land

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Potential home buyers line up at a sales office in International Commerce Centre (ICC) in July 2020 to buy 108 units at the Regency Bay development by Sun Hung Kai Properties in Tuen Mun. Photo: Xiaomei Chen
Lam Ka-sing
Homebuyers in Hong Kong may think it is a good sign when developers are buying land for bargain prices, as CK Asset did on Wednesday for a parcel in Kai Tak. If the land is cheaper, the resulting homes built there will surely be more affordable too, right?

Don’t bet on it. History shows us this common sense belief is misguided.

For example, in February 2016, China Overseas Land and Investment bought the land where The Regent now stands in Tai Po for just HK$1,848 (US$236) per square foot. The price was low because of a judicial review and the large size of the plot.

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But when the development launched in January 2019, homes sold for about HK$12,800 per square foot on average. By August 2021 one flat went for HK$21,000 per square foot.

The Kai Tak area of Kowloon, Hong Kong, on December 08, 2021. CK Asset on Wednesday won the bidding for a land parcel in the area for HK$8.7 billion (US$1.12 billion), the lowest price paid for a residential parcel in eight years in the area, which was formerly the city’s airport. Photo: Dickson Lee
The Kai Tak area of Kowloon, Hong Kong, on December 08, 2021. CK Asset on Wednesday won the bidding for a land parcel in the area for HK$8.7 billion (US$1.12 billion), the lowest price paid for a residential parcel in eight years in the area, which was formerly the city’s airport. Photo: Dickson Lee

In fact, if anything, the relationship between land prices and home prices often goes in the opposite direction. Home prices serve as an indicator for developers on how much to pay, said Leo Cheung, adjunct associate professor at the University of Hong Kong.

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