Record land premium at residential site above Hong Kong subway line

Home prices at Lohas Park in the Tseung Kwan O area of Hong Kong have lagged behind the overall performance of housing estates along MTR lines but land prices in the area have risen 25 per cent in two months.

Residential land prices in the area hit a record on Friday when the HK$2.955 billion - HK$2,830 per square foot - land premium payable for phase eight of Lohas Park was unveiled.

"The levy will be the highest for a residential project in the area," said Victor Lai Kin-fai, the chief executive of consultancy Centaline Professionals.

The asking land premium was 25 per cent higher than the HK$2,260 per square foot for the sixth phase. It was also higher than market expectations of HK$2.6 billion, or HK$2,600 per square foot.

Lai said phase eight should be compared with phase six, which was also a purely residential development rather than the commercial-residential project for the seventh phase.

The land premium for phase seven was HK$3,147 per square foot, due to the project including a nearly 500,000 sq ft shopping mall. "Land premium for commercial land will be more expensive," Lai said.

Taking construction costs and interest expenses into account, Lai estimated the total investment cost for the project could reach HK$7 billion.

He said the winning developer would have to offer the units for HK$12,000 per square foot to make a reasonable profit.

Hui Chi-king, assistant district manager at Midland Realty's Lohas Park branch, said the positive news had little impact on sale volumes and prices in Lohas Park's secondary market.

"Sales remained flattish," he said.

There were 22 deals done in August, the same as a month earlier, Hui said.

At present, units at Lohas Park are changing hands for between HK$8,764 and HK$11,368 per square foot. The area's average transaction price was HK$9,503 per square foot last month, up 2.9 per cent from July, according to Centaline Property Agency.

Last Friday, a 719 sq ft unit at Le Prime, the second phase of Lohas Park, sold for HK$6.6 million, or HK$9,179 per square foot, according to Centaline.

The tender document for the eighth phase requires the winning developer to share 15 per cent of the future profit on property sales with MTR Corp.

The tender is due to close on September 30.

The project will comprise no more than 1,430 flats in three towers on a 179,091 sq ft site at Lohas Park MTR station.

It is expected to be completed in 2021 and could yield a gross floor area of 1.04 million sq ft. With the number of units capped at 1,430, the average size will be 730 sq ft in saleable area.