China Vanke, the largest mainland developer in terms of property sales, has expanded further into Hong Kong's property market by acquiring a residential site in Wan Chai. Local developer Soundwill yesterday announced it had sold its residential site to Vanke for HK$860 million, or HK$15,190 per square foot. It is Vanke's second land acquisition in Hong Kong. "They believe the property markets of Beijing and Shanghai will be similar to the Hong Kong property market in five to 10 years. They want to know how to work in this kind of property market in the future," an analyst said. "They have no plan to expand aggressively in Hong Kong. Their big market is in the United States." The site at 12-24 Lun Fat Street, near J Residence, covers an area of 7,077 sq ft. There is a 51-year-old building with eight floors on the site. Soundwill bought the building last year. It could construct a residential building with a total gross floor area of 56,616 sq ft. Mainland developers such as Vanke, Poly Property and China Overseas Land & Investment have acquired a number of sites in Hong Kong since last year, despite the recent down cycle in the city's property market. "The business environment in the mainland property market is even worse than in Hong Kong. And the net profit margin of property development on the mainland is about 9 per cent only due to higher tax rates. But in Hong Kong, the net profit margin is about 17 per cent and the funding cost is low," said Nicole Wong, CLSA's regional head of property research. Wong said there would be fewer sites withdrawn from tenders if more mainland developers joined land bidding. It could help in increasing the land and housing supply as a result. Vincent Cheung Kiu-cho, a national director of Greater China at Cushman & Wakefield, said: "Even if mainland developers paid a high price for land acquisitions, it won't boost property prices. It has to depend on market sentiment. They may look for a lower profit margin." Vanke's first land acquisition in Hong Kong was in January last year. It teamed up with New World Development to win the tender for a site in Tsuen Wan for about HK$3.44 billion, or HK$5,088 per square foot. They also submitted expressions of interest for MTR Corp's phase four of the Lohas Park development in Tseung Kwan O last month. Meanwhile, the government yesterday announced a small residential site in Wan Chai will be up for tender on April 25. The tender will close on May 30. The site at Schooner Street, near Ship Street Playground, covers an area of 2,960 sq ft.