MTR Corp expected to lower land prices in bid to sell Tin Shui Wai site

MTR Corp is expected to settle for lower prices in upcoming tenders for its sites and divide them into smaller plots to speed up sales as the government steps up pressure on it to release more land to ease the housing shortage, according to industry observers.

The rail operator, in which the government holds the controlling stake, is required to sell enough land to provide 4,600 units, or nearly 70 per cent of the targeted 6,700 for the three months to December, under the government's land sale programme for this quarter.

There are two residential sites in the pipeline, one near the Tin Wing Light Rail Terminus in Tin Shui Wai, which could provide 1,500 flats, and the other is the rest of the parcels at Lohas Park in Tseung Kwan O that could yield 3,100 units.

MTR Corp has failed to sell the Tin Shui Wai site in two previous tender attempts and is likely to have another go before the end of the year to meet the land sales target.

"In its third attempt, MTR Corp needs to come up with more sweeteners if it wants to sell the Tin Shui Wai site," said Alvin Lam Tsz-pun, a director at Midland Surveyors.

Poor response forced the withdrawal of the 196,249 sq ft site in Tin Shui Wai from tender in February last year. This February, MTR Corp tried again by adding various sweeteners, such as by replacing the estimated HK$2.69 billion land premium with an easier condition, but failed again.

Apart from slashing the asking price, MTR Corp needs to offer even more sweeteners such as easing the profit-sharing arrangement and other technical clauses, Lam said.

A developer, who did not want to be identified, said the project will involve relocation of the existing light rail depot. "It is hard to comply with the tender requirement that the development has to be completed in five years," he said.

Lam said the price of the site could not exceed HK$2,000 per square foot as two other sites close to Hong Kong Wetland Park in Tin Shui Wai that were tendered were sold for HK$1,855 per square foot in July. Sun Hung Kai Properties paid nearly HK$4.2 billion to buy the two sites.

Lam said the repackaging of the site into smaller plots would bring in more bidders. In its second attempt for the site, MTR Corp drew just three bidders - Cheung Kong (Holdings), Sun Hung Kai Properties and Sino Land.

"Smaller lots usually generate more players and higher bids as they involve lower investment risk," said Lam.

No problems were forecast for the remaining parcels at Lohas Park as the tender is less complicated, he said.

"With a MTR station, the area is well developed and will attract more bidders as the government will split the site into smaller lots," Lam said.

Secretary for Development Paul Chan Mo-po last week said the earlier failures of the Tin Shui Wai tender were marginal cases.

"They [MTR Corp] plan to re-tender it in this quarter," he said. "Given the current sentiment in the market and considering the government has been able to sell two other parcels in Tin Shui Wai despite the failed tender, we are hopeful the fresh tender will be successful."

Chan said the government would consider dividing the Lohas Park site into smaller lots to bring in more bidders.