Kai Tak’s residential land soars to record HK$25.1 billion price tag as Sun Hung Kai wins tender

Sun Hung Kai Properties has prevailed in a lacklustre tender for a plot of residential land at Hong Kong’s former Kai Tak airport site, paying a record HK$25.16 billion (US$3.2 billion) for the city’s most expensive land parcel, according to data provided by the Lands Department.

The site, located next to the Kai Tak MTR station, can yield a gross floor area of 1.42 million sq ft.

“It is the new land king. It will fuel further rises in home prices in the area,” said Victor Lai Kin-fai, a managing director at Centaline Surveyors.

The total price translates to HK$17,776 per square foot, which means an apartment complex built on the site – squeezed between two commercial parcels previously owned by Nan Fung Development and Lifestyle – will sell for at least HK$32,000 per square foot, after adding in development and construction cost, and the developer’s profit, according to valuers. 

Sun Hung Kai Properties said the total investment cost for the site will be about HK$40 billion. 

The jaw-dropping price will put further pressure on Hong Kong Chief Executive Carrie Lam Cheng Yuet-ngor to ease a housing shortage in the world’s least affordable city for owning a home.

Sun Hung Kai Properties, one of the city’s largest land owners, had submitted its bid on its own. In doing so, it beat competitors such as Henderson Land Development, CK Asset Holdings and a consortium of Sino Land, Kerry Properties, K Wah International with Lifestyle International Holdings. Another one was formed by Wheelock Properties, Chime Corporation, New World Development Company and China Overseas Land and Investment.

The winning bid for the site, the 14th piece of Kai Tak land sold by government tender since 2013, smashed the record set last November by a waterfront housing site off Hing Wah Street West in Cheung Sha Wan. That parcel sold for HK$17.28 billion to a venture between Sino Land, Shimao Property Holdings, Wheelock Properties, K Wah and Sea Holdings.

In May last year, Nan Fung paid HK$24.6 billion, or HK$12,000 per square foot, for the office-retail-hotel site, while Sogo operator Lifestyle International won a plot that houses the city’s first iconic twin office towers for HK$7.39 billion, or HK$6,733 per square foot, in November 2016.

The latest sale prompted surveyors to revise upwards their projection for the remaining sites, located on the runway of the former airport, which will come up for tender later.

Vincent Cheung Kiu-cho, deputy managing director for Asia valuations and advisory services at Colliers International, said he expected land prices for the plots located on the runway to cost HK$20,000 per square foot.

“The [latest] site is about 10 minutes travel to Central, once the Kai Tak station starts operations [in 2019], and the site is also situated in the heart of the city’s second core business district,” he said.

The Kai Tak development aims to house up to 90,000 people and create more than 83,000 jobs by making it the city’s second most important business district. It aims to provide 62.43 million sq ft of office space, doubling the space in Central by 2020.

Cheung said the site would have 300,000 sq ft allocated for retail spaces, plus an underground shopping street connected to the Kai Tak station, which is part of the Sha Tin to Central Link, and is expected to open in 2019.

“The site will be highly accessible by the MTR line,” he said. “The journey time from mainland Chinese to Kai Tak will be cut by taking the Sha Tin to Central Link in the future,” he said.