Kerry Properties wins Kowloon Tong government site for HK$7.3 billion
Sale price at upper end of expectations. Kerry outbids 10 others to win government’s most expensive land sale this year
Kerry Properties has outbid 10 other companies to win a luxury residential site at Kowloon Tong’s Beacon Hill after paying HK$7.268 billion.
The price is at the upper end of market expectations that ranged from HK$6.2 billion to HK$7.5 billion, making it the most expensive government land sale this year. The price is equivalent to a unit rate of HK$21,016 per square foot, the highest for a residential development site in Kowloon at government auction.
The Lands Department on Wednesday said the tender for the 235,182 square foot site on Lung Cheung Road was awarded to Kerry’s wholly owned subsidiary, NMC 6 Ltd.
“The price, which was at upper end of the forecast, indicates developers’ confidence in the luxury housing sector,” said Thomas Lam, head of valuation and consultancy at Knight Frank. Lam had predicted the site could be sold for as much as HK$7.2 billion, citing limited supply as a reason.
“Developers are underpinning hopes on future demand from affluent individuals in China,” said Lam.
As local mainland governments have been introducing measures to cool their sizzling property markets, Chinese investors are likely to diversify their wealth towards Hong Kong, especially in the luxury residential market where supply is limited, he said.
Guangzhou and Shenzhen in southern China are the latest cities to impose new measures to cool their overheated real estate markets, including higher mortgage down payments and home purchase restrictions.
Other cities such as Beijing, Tianjin, Wuhan and Hangzhou have also recently imposed price-cooling measures.
The depreciation of the renminbi is another factor that has been cited as a reason for investments outside of China.
Chu Ip-pui, an executive director of Kerry Real Estate Agency, a unit of Kerry Properties, said there has been an uptick in demand from mainland Chinese buyers seeking Hong Kong property assets.
“We do not see a sharp jump in sales, but we have noticed that they are coming back and the trend will continue,” said Chu.
He added that Kerry Properties was attracted by the site’s location and the limited supply of luxury properties in Kowloon. In February 2015, Kerry bought a residential plot next to the Beacon Hill site for about HK$2.39 billion, or HK$20,534 per sq ft.
Chu said the Beacon Hill project will include detached houses together with low rise apartment towers , yielding a gross floor area of more than 343,000 sq ft. Total investment cost could be over HK$10 billion, according to Chu.
Chu said apartments in nearby developments are now selling for HK$35,000 per sq ft to HK$40,000 per sq ft.
The residential site had attracted 11 bids from big and small developers including Cheung Kong Property Holdings, Henderson Land Development, Sun Hung Kai Properties , and Wheelock Properties, when the government closed tender on Friday.
“The amount paid fell within market expectations and is in line with prices being achieved within the vicinity,” said Denis Ma, the head of research, Hong Kong at JLL.
By lump sum, the Beacon Hill site is the third most expensive residential development site sold by the government in Hong Kong, according to Ma.
The most expensive site by unit rate was 12 Mount Kellet Road, which was sold to Sun Hung Kai Properties in 2006 for an average price of HK$42,196 per sq ft.
Shares of Kerry Properties closed down 1 per cent to HK$25.05, before the tender result was announced.