Government offers lower-than-expected land premium on Ho Man Tin Station development site

The Hong Kong government is offering a lower-than-expected land premium, or levy charged for a change in land use, on a luxury residential site being offered for sale above Ho Man Tin Station, in a bid to drum up interest among land-hungry developers.

The premium for the “package one” development is likely to be HK$6.28 billion, or HK$8,459 per square foot, according to a source, who has read the tender document.

MTR Corp offered the project for tender on Thursday, and the levy is 29-43 per cent lower than market expectations of HK$8.9-11 billion.

There had already been 28 expressions of interest filed by developers for the Kowloon site by November 21.

Despite the lower levy, the rail operator still expects to raise its profit-sharing ratio on the site to 35 per cent from the average of 10-15 per cent on other development sites along MTR lines.

Vincent Cheung Kiu-cho, executive director of valuation and advisory services for Asia at Colliers International, said the profit-sharing ratio has been set higher because MTR wants to secure higher profit from the project.

MTR will award the tender to the highest bidder. It needs to pay the government land premium, and for any site formation work needed to ensure any project can be built on top of the station.

Even taking into account the 35 per cent ratio, he still expects the site to fetch bids of between HK$9,700 and HK$10,000 per sq ft.

That estimate is based on land transaction prices of between HK$9,875 and HK$12,540 per sq ft being paid for sites along Fat Kwong Street and Sheung Shing Street, in the vicinity of Ho Man Tin station.

Goldlin Financial won a government site on Sheung Shing Street in March for HK$6.38 billion, or HK$10,899 per sq sq ft, the highest recorded in the area.

Victor Lui Ting, deputy managing director at Sun Hung Kai Properties, said he thought the land premium level was reasonable.

“We will study the tender details,” he said, adding his company is developing a luxury residential project called Ultima opposite the Ho Man Tin Station, which has achieved sale prices of around HK$32,000 per sq ft. Its total gross floor area will be 742,716 sq ft, which will accommodate between 800 and 1,000 flats. It has a target completion date of sometime between 2022 and 2033

Government tenders for that site are due to close on December 21, and Hong Kong’s property developing majors, including SHKP, Henderson Land Development , Cheung Kong Property and Sino Land, have already registered an interest.