Hong Kong developers may shun sites for small flats amid mortgage curbs

The latest round of mortgage tightening to contain prices of small homes may weaken developers' appetite for land designated for mass housing but will intensify competition for luxury residential sites.

Surveyors said bidding for the upcoming government tender would be conservative due to the cautious market outlook.

"Whenever the government rolls out new curbs, developers may be more careful in land acquisitions," said Ringo Lam Chun-chiu, a director for valuation at AG Wilkinson & Associates. "There's a higher chance of seeing sites fetch lower prices in upcoming tenders."

Lam said developers might focus their buying on luxury sites as buyers for big-ticket transactions were less affected by banks' conservative lending policies.

Frenetic buying of small flats has driven prices to record highs, prompting the Hong Kong Monetary Authority to impose new mortgage tightening measures.

HKMA chief executive Norman Chan Tak-lam said on Friday the loan-value ratio for residential properties less than HK$7 million would be capped at 60 per cent, down from a range of 60 to 70 per cent. That means buyers will need to pay a higher down payment.

Under the new home loan policy, Lam said, developers would prefer to build larger flats, with areas of 1,000 sq ft or more, to cater to buyers who were not heavily reliant on bank loans.

He singled out the luxury residential site in Lung Cheung Road, Beacon Hill, as one that would spark fierce competition among developers.

The site is one of 29 contained in the government's land sale programme for the next fiscal year to March. Four commercial plots will also be put up for tender during the period.

Alvin Lam Tsz-pun, a director at Midland Surveyors, said the low-density site in Lung Cheung Road would be the most expensive and could fetch HK$6.85 billion, or HK$20,000 per square foot. It could yield a gross floor area of 342,769 sqft.

The estimated valuation for another luxury residential site in Sheung Shing Street, Ho Man Tin, was HK$5.8 billion, or HK$10,000 per square foot. The site could generate a gross floor area of 587,714 sqft.

Five residential sites worth an estimated HK$7 billion would be offered for tender in the first quarter, Alvin Lam said.

The sites - three in Tuen Mun and one each in Yuen Long and Cheung Chau - will supply 3,100 flats.

Victor Lai Kin-fai, the chief executive of consultancy Centaline Professionals, said developers would be more active in acquiring land.

The upcoming land sale would provide more flexibility as the government no longer imposed restrictions on the number of flats in the latest tender.

"Developers will be free to build projects in various sizes to respond to market demand," Lai said. "Such incentives will spur bidding interest."

The supply of small flats would reach its peak over the next two years when many projects on government sites earmarked for small to medium-sized flats were due to be completed, he said.