Chinese builders pay record HK$16.86 billion for Ap Lei Chau site

Two Chinese developers paid a record HK$16.86 billion (US$2.17 billion) for a plot of residential land at Ap Lei Chau, topping market valuations by almost 50 per cent, making it Hong Kong’s most expensive lump-sum sale to date.

A land parcel measuring 126,595 square feet (11,761 square metres) was sold by tender to Unicorn Bay (Hong Kong) Investments, according to the Land Department’s data. The buyer is a venture between Logan Property Holdings of Shenzhen and Guangzhou-based KWG Property Holding.

With a total gross floor area of 762,091 sq ft, the price translates to HK$22,118 per square foot in land cost. Property agents expect apartments on the site to sell for at least HK$32,000 per square foot, a record for the district.

Ap Lei Chau, Cantonese for “duck’s tongue peninsula”, is a small island connected by a bridge to the south of Hong Kong Island near the Aberdeen fish market.

The sale is the government’s largest lump-sum sale, exceeding the HK$11.8 billion fetched in 1997 for a Siu Sai Wan site that is now home of Island Resort.

The record price undermines the assertion by Chief Executive Leung Chun-ying that a November 2016 policy to raise the stamp duty for individual second-home buyers to 15 per cent had “achieved its goal” in deterring speculative buyers.

First-time buyers made up 95 per cent of January’s residential property sales, while home sales requiring a double, or 15 per cent, stamp duty plunged 83 per cent to 406 transactions.

“These figures show the government’s efforts to suppress investment demand for flats have been effective,” Leung said this week.

Apart from bolstering the government’s coffers, buoyant land sales boosted overall market sentiment and encouraged apartment owners to raise their selling prices, analysts said.

The government should speed up the release of more land for sale to stabilise the housing market, they said.

“The aggressive bidding shows that developers outside Hong Kong see the city’s property market as an attractive place to invest in, taking into account the limited new land supply and well-established property transaction system,” said Lau Chun-kong, head of the valuation department at property consultant JLL. “The government must increase land supply if they hope to maintain a healthy and stable housing market.”

Hong Kong’s land supply for private housing would be enough for almost 32,000 flats this year, surpassing targets for the fourth year, the government said on Thursday.

The government plans to sell 28 plots of land for private housing in the 2017-2018 financial year and will provide almost 19,000 flats, with the remainder coming from railway property, urban renewal and private redevelopment projects.

That supply was still not enough, making it hard for buyers to find apartments, Lau said.

The Ap Lei Chau site, expected to become a luxury residential property enclave, would not immediately affect the price of mass housing, but it would boost the overall market sentiment, said Alvin Lam, director of Midland Realty’s valuation department.

Chinese developers would continue to snap up prime sites in Hong Kong, paying a premium to squeeze out local builders, analysts said.

HNA Group, the Chinese conglomerate that owns Hainan Airlines, paid HK$20 billion to buy three parcels of land at Hong Kong’s former Kai Tak airport in three months to January.

Additional reporting by Summer Zhen