Property market a house divided

The polarisation of Hong Kong's housing market is deepening, with a luxury site sold at the low end of market expectations, and a plot designated for mass-market flats fetching a higher price than expected.

Contractor Chun Wo Development beat major developers to secure the luxury development site - which could yield 323,308 sq ft in gross floor area - in Kau To Shan, Sha Tin, for HK$2.71 billion, according to the Lands Department. The price represents an average land cost of HK$8,382 per square foot.

The winning bid was at the low end of market expectations of between HK$2.68 billion and HK$3.01 billion.

However, Sun Hung Kai Properties, the largest developer in terms of market value, snapped up a smaller site in Yuen Long for HK$751 million, said the department.

The result exceeded the market forecast of between HK$530 million and HK$695 million.

The price tag represents an accommodation value of HK$3,243 per square foot.

Vincent Cheung Kiu-cho, a director at Cushman & Wakefield, said the sales outcomes indicated that mass residential sites were becoming more popular as sales were dominated by genuine homebuyers.

"Most developers hope to achieve a faster cash flow, so they can reinvest in the market," Cheung said.

The fact that the luxury site went to Chun Wo suggested that major developers were taking a cautious view of the high-end sector, he added.

"The result at the luxury site shows that the major players are more conservative. Land prices will decline faster after small to medium-sized developers' capital has dried up, and fewer competitors participate in land sales."

Cheung expects that the winning developer of the luxury site will need to offer units for HK$18,000 per square foot of saleable area to make a reasonable profit. That figure would be HK$7,000 per square foot for the Yuen Long site.

SHKP deputy managing director Victor Lui said the total investment would be about HK$2 billion.