Large residential site in Hong Kong’s Tai Po sold for surprisingly low price
A large residential site in the Tai Po district of Hong Kong sold for a surprisingly low HK$1,848 per square foot, providing further evidence the government is willing to accept lower land premiums to speed up land sales in the city’s struggling property market.
The Lands Department said on Friday the tender for the site at Shan Tong Road, Lai Chi Shan has been awarded to the highest tender, Asia Metro Investment, a unit of the mainland’s China Overseas Land & Investment for HK$2.13 billion, or HK$1,848 per square foot.
“I think most surveyors dropped their eye glasses after reading the sales outcome,” said Victor Lai Kin-fai, chief executive of consultancy Centaline Professionals.
The price tag means the land value dropped 59.5 per cent in five months from when the Lands Department sold another residential site in Pak Shek Kok, Tai Po near Science Park for HK$4,567 per square foot in September.
In 2009, another site which is also in Pak Shek Kok sold for a record high HK$7,284 per sq ft.
Yesterday’s sale outcome was also 42 per cent below Centaline’s estimate of HK$3.68 billion, or HK$3,200 per sq ft. The agent had already revised down its original valuation of the Shan Tong Road plot by 20 per cent last week as a result of the previous disappointing land sale outcome.
The readjustment of the land cost was also due to the fact that the plot faced a potential judicial review that could stall its sale, Lai said.
“The result reflects the growing bearish view of developers toward the market outlook. What surprised me most is the government was willing to sell the site at such a low price,” he said.
“The winning bid was already unexpectedly low, you can imagine what are the other five bidders offers and their views on the markets’ prospects,” he said.
The other five bidders are Cheung Kong Property, Great Eagle Holdings, Henderson Land Development, and joint ventures between Sino Land and Vanke Property, as well as Emperor International Holdings and the Grand Ming Group.
As home prices have lost 10 per cent from the peak in September last year, he believed land values would plunge by about 30 to 40 per cent.
“It is normal to see land value drop faster than home prices. Given developers are finding it difficult to reduce construction costs, the only way is to suppress the land value in order to increase their profit margins. Land prices have not found the floor yet,” he said.
Last week, Hong Kong’s official home price index dropped to an 11-month low in December as a growing number of individual home owners became willing to cut their prices, with land prices dropping much faster as market sentiment deteriorated, says industry experts.
The Rating and Valuation Department’s monthly supplement showed the general price index for private homes has declined for three straight months to 285.2 in December, down 2.82 per cent from 293.5 a month earlier and the lowest since January last year.