Developers are expected to show strong interest when the government invites tenders for two luxury residential sites in the New Territories, with developments on both plots expected to yield high profit margins. Last month, two residential sites in Tuen Mun were sold at 8 per cent and 24 per cent below market expectations. The scrapping of an auction for an MTR Corporation site at Tin Shui Wai also reflected pessimism among developers about the outlook for the mass residential market in the New Territories. "I think developers will have a better response to the luxury residential sites in the New Territories," said James Cheung, executive director of Centaline Property's surveying unit. "A site will still be attractive to developers if it is in a good location and enjoys a better view," Cheung said. The tendering for the sites, in Pak Shek Kok, Tai Po, and in Sai Kung will close on Friday. "The profit margin in developing a luxury project is higher than with a mass residential project," Cheung said. "It means the investment risk will be lower. "We don't need to be overly pessimistic about the tenders." Surveyors estimate the site in Tai Po is worth between HK$3.57 billion and HK$5.01 billion, or HK$5,000 to HK$7,000 per square foot of buildable area. The Sai Kung site is worth between HK$96 million and HK$120 million, or HK$12,000 to HK$15,000 per square foot of buildable area, they say. The profit margin in developing a luxury project is higher than with a mass residential project. It means the investment risk will be lower James Cheung, Centaline Property Agency The Tai Po site covers an area of 204,516 sq ft. The winning bidder could build homes with total gross floor area of 715,806 sq ft on the plot. "The site has the best location, close to the Science Park, and enjoys a sea view," said Patrick Chow Moon-kit, head of research at Ricacorp Properties. "The average price of the nearby project Providence Bay [developed by a consortium led by Sino Land] is about HK$11,000 per square foot. If the developer pays a land price of HK$6,300 per square foot to buy the site, it will already be able to generate a reasonable profit," Chow said. Cheung said developers would be interested in the Tai Po site because it was close to the waterfront. He expects the site to be worth HK$5.01 billion, or HK$7,000 per square foot of buildable area. "It is easier for the developers to estimate the development cost and selling prices of the flats, as there is a new residential project [Providence Bay] nearby." But Vincent Cheung Kiu-cho, national director for Greater China at Cushman & Wakefield, is not optimistic about the response to the site. "There is still plenty of stock at Providence Bay. It will be in direct competition to the flats at the new site. The site is worth HK$3.57 billion, or HK$5,000 per sq ft only," he said. However, Chow said those flats would probably have all been sold by the time those on the new site are ready for presale in 2017. Cheung of Centaline said the Sai Kung site was not particularly attractive, as it was close to a road and without a sea view. Chow expects the acquisition cost of the site to be about HK$100 million. "It is not a big amount, and it is not easy to get a luxury site. I think many people will be interested," Chow said.