Fewer developers submit bids for Kai Tak runway plot even as valuation is slashed to January 2017 levels

The third residential parcel on Kai Tak’s runway missed market expectations as fewer than expected developers submitted tenders, while one surveyor slashed its valuation of the plot to January 2017 levels because of downbeat sentiment, lack of full sea view and retail component.

The 97,393 square feet plot on the site of Hong Kong airport’s former runway fetched six bids at the close of tender on Friday noon, missing expectations from surveyors who had expected at least eight bids.

“Developers are no longer bullish, but these new land tenders are for their long term investments [with a horizon] of at least five to eight years,” said Hannah Jeong, head of valuation and advisory at Colliers International. “Even though the current soft market has caused local and overseas developers to be more cautious, we were expecting more than eight bids.”

Developers that submitted bids include CK Asset, Sun Hung Kai Properties, Chinachem Group, China Overseas Land and Investment, a joint venture between K Wah International and Sino Land, and a consortium consisting of Henderson Land Development, Wheelock Properties, Empire Group and New World Development.

Jeong expected the plot’s value to fall short of previous ones. She slashed its valuation to HK$12,800 per square foot, back to the level seen in January last year when Chinese conglomerate HNA’s subsidiary bought a parcel at HK$13,000 per sq ft.

“Developers will put lower bids to take advantage of the current soft market,” Jeong said. “The site also does not have full view of Victoria Harbour and it has no retail component to boost the tender price.”

Colliers expects the bids to range between HK$12,800 to HK$14,000 per sq ft, lower than the previous lots. It, however, expects completed homes to sell for between HK$25,000 to HK$35,000 per sq ft, or an average of $27,000 per sq ft.