Unpopular Hong Kong land sites may test new lows with MTR Tin Wing tender
Third attempt at tender for MTR's Tin Wing rail site will gauge appetite of developers for new land plots before expected spike in flat supply
Land prices in less popular locations might tumble to fresh lows, market watchers warn, given the likelihood of a spike in new flat supply to a four-year high and an uptrend in interest rates.
The upcoming tender of a large site at the MTR Corp's Tin Wing Light Rail Terminus in Tin Shui Wai - viewed less favourably than sites on other railway lines - will be a test of developers' appetite for new sites before a flood of new land releases in the Northwestern New Territories.
"Location, location and location are key determinants for land value as it will affect the flat prices when they are offered for sale in future," said James Cheung, a director at Centaline Surveyors. "It would not be surprising to see this land parcel at Tin Wing station set a record low price."
In October, MTR Corp awarded the 2,900-unit residential portion of the Tai Wai Station project to New World Development for HK$1,393 per square foot, the lowest price in terms of land value per square foot for a project along the subway line in the past three years.
"The site at Tin Wing Light Rail Terminus may go for even lower than that level, given its remote location," Cheung said.
Developers would avoid submitting aggressive bids in high-risk areas that would see a large supply of new flats in the future, he said.
The 1,500 unit site, being released for tender for a third time, is in Yuen Long district where 4,800 new flats are in the pipeline this year, accounting for 50 per cent of the total new supply in the New Territories.
"The entry barrier needs to be lowered further if the government does not want to cancel the sale again," said Alvin Lam Tsz-pun, a director at Midland Surveyors.
He estimated the land premium for the site, to be finalised by the Lands Department, would be HK$1.47 billion, or HK$1,500 per square foot.
The estimated land premium would be nearly 20 per cent lower than two other sites close to Hong Kong Wetland Park in Tin Shui Wai that were sold for HK$1,855 per square foot in July last year.
Sun Hung Kai Properties paid nearly HK$4.2 billion to secure the two sites at the government tender.
The 197,228 sq ft Tin Wing Light Rail Terminus site will provide a gross floor area of up to 980,072 sq ft of residential space and 2,200 sq ft of commercial area. The project is expected to be completed in 2021. The deadline for submitting an expression of interest is Wednesday.
A poor response forced the withdrawal of the site from tender in early 2013. In February last year MTR Corp tried again, adding various sweeteners such as dropping the estimated HK$2.69 billion land premium and instead asking developers what they would be willing to pay, as well as waiving the requirement for the developer to bear the HK$400 million cost of site formation works above the station. However, there were still no takers.
Last month, Secretary for Development Paul Chan Mo-po said sites to be released in the fiscal year to March would provide 20,700 new private sector flats, the highest level since 2010.
That would be about 10 per cent higher than the historical annual average of 18,800, he said.