Prices of new flats in Lohas Park in Tseung Kwan O have fallen to near 2017 levels despite soaring land costs in the area, contradicting a strong recovery in the world’s most expensive property market. Late last month, Wheelock Properties released flats at its Montara project at a steeper than usual discounts to woo buyers. The move came a day after MTR Corp on April 25 awarded the 11th phase of development at Lohas Park, in which land premium paid to the government surged to a record HK$3,194 (US$407) per square foot, to a consortium including Sino Land. At the same time, prices of pre-owned flats at Lohas Park have risen 0.8 per cent month on month in April to HK$11,974 per sq ft, according to data from Centaline Property Agency. Alex Leung, senior director at CHFT Advisory and Appraisal, said the decoupling of land costs and selling prices will be more profound in areas with abundant supply. Buyers pack sales venues expecting home prices to continue rising “[The relatively low price] is due to direct competition between various developers,” said Leung. He added that developers would rather sell quickly to recover their investment because even if they are able to sell at higher prices later, they cannot pocket all the gains as they have to share the profit with MTR Corp. About 8,630 units will be available for sale in phase eight to 13 in Lohas Park – a major source of flats in the city over the next several years. Lohas Park, in the New Territories, will be the city’s largest residential enclave with an estimated 58,000 residents in 21,500 flats, when the project is completed in 2025. Lee Shu-kam, associate head of the department of economics and finance at Shue Yan University, said that developers that hold on to their projects could expose themselves to undue risks amid growing uncertain global economic outlook. Unmoved by the return of the bull market, Wheelock priced the first batch of 500 flats at its 616-unit Montara, phase seven development, at an average of HK$14,704 per sq ft. The price was 3.9 per cent lower than phase six, LP6, launched by Nan Fung Development, in September last year. It was also just HK$106 per sq ft more than the introductory price of Wings at Sea Two, launched by Sun Hung Kai Properties, in 2017. Why foreign buyers are piling into China’s commercial property Ricky Wong, managing director of Wheelock, said the first batch of flats at Montara were priced low to draw market attention. “This was our strategy for Malibu too last year. Later on, we will gradually increase prices,” Wong said. Wheelock’s strategy proved successful. The developer immediately raised prices for the remaining 116 flats by 6.2 per cent to an average of HK$15,612 per sq ft after buyers snapped up all 500 units on offer on May 4. In June 2015, Wheelock won the site on which the Montara is coming up at a land premium, or land cost, of HK$3,147 per sq ft. This is 38.7 per cent higher than the HK$2,269 per sq ft for the LP6 plot, which was sold in January the same year. Despite the higher premium, market observers expect Wheelock to reap a reasonable profit margin. “With [all-in] costs of around HK$11,000 per sq ft, the profit margin will be about 27 per cent,” said Raymond Cheng, head of Hong Kong and China property research at CGS-CIMB Securities. Cheng added that prices of flats in Lohas Park are some 15 to 20 per cent cheaper compared to private estates in Tseung Kwan O, which is one MTR station away, because of traffic issues and lack of amenities.