Minmetals buys record HK$4 billion site in Yau Tong

Hong Kong-listed mainland developer Minmetals Land has paid HK$7,000 per square foot for a residential site in Yau Tong, a record price for a traditional industrial area.

The Lands Department announced the mainland developer had secured the government site for HK$4.0 billion after defeating 12 competitors, including Sun Hung Kai Properties, Cheung Kong Property, Sino Land, Wheelock Properties and a joint venture formed by New World Development and Vanke Property (Overseas).

Minmetals said it would build four residential blocks with 792 flats on the site, and that it would need a total investment of HK$7 billion, inclusive of the land cost.

“The winning bid is outrageous,” said Thomas Lam, Knight Frank’s head of valuation and consultancy, who had forecast the site could just fetch slightly below HK$4,000 per sq ft.

“Although the site is located along the waterfront, it is surrounded by industrial buildings and cement plants.”

In 2014, Kowloon Development won a residential site in Lei Yue Mun, a nearby area of Yau Tong, for HK$1.58 billion, or HK$5,040 per square foot.

The latest land sale indicates land prices have now jumped 40 per cent in the area in the past two years.

Located at the junction of Shung Shun Street and Yan Yue Wai, the site could yield a total gross floor area of a maximum of 566,725 square feet.

Lam said that units in the area are currently being offered at about HK$11,000 to HK$13,000 per sq ft, and so Minmetals Land would have need to offer the units for about HK$15,000 per sq ft before making a reasonable profit.

He said it could take least 10 to 15 years to turn the area into a residential and commercial area.

Mainland developers have been filling their boots in the Hong Kong land market since 2013, by securing sites at jaw-dropping prices.

The biggest buyers include the mainland’s largest homebuilder, China Vanke, Poly Property Group and Shimao Property Holdings

In the time since, JLL said bid prices from mainland developers have exceeded market expectations in 73 out of every 100 bidding processes, compared with 59 out of 100 for local developers.

Lam believes the latest purchase is Minmetals Land’s first participation in a Hong Kong government land auction. The firm is a subsidiary and the Hong Kong-listed real estate flagship of China Minmetals Corporation.