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Global fears could curb Hong Kong’s land sale prices

HONG KONG: The latest global credit turmoil and the Hong Kong government's stated intention to crack down on property speculation might put the brakes on bidding at tomorrow's (May 11) government land sale, say some analysts.

Up for auction is a 282,000 sq ft waterfront residential site in Tung Chung on Lantau Island that was expected before the latest global financial crisis to fetch as much as HK$4.75 billion (RM1.96 billion).

But some analysts have revised their expectations downwards in the wake of the fresh blow to investor confidence caused by the debt crisis in Greece, as well as the decline in sales volume in response to government plan to end rampant property speculation, and alternative and lower-risk sites up for sale.

"Sales volumes in Hong Kong are falling as concerns grow that the government here is also poised to curb property speculation, and the recent volatility on the stock market has also hurt investment sentiment," said Alnwick Chan Chi-hing, executive director at property consultancy Knight Frank.

Chan has revised downward his original forecast that the site, which will provide a total gross floor area of 1.43 million sq ft, would be sold for HK$4.9 billion, to HK$4.6 billion. He also believes that in the new investment climate, the attention of developers may be diverted to more centrally located sites which are less at risk of a sharp fall in buyer sentiment.

Poorer sentiment has already dented sales, and Tony Poon Chi-kwong, general manager at Centaline Property Agency's Tung Chung branch, said sales volumes in the secondary market have plunged by 70% as both buyers and sellers postponed decisions until the results of the auction become known.

"Our firm handled just 10 to 12 deals last weekend from 40 over the previous weekend," said Poon. Bookings for viewing flats also dropped from 40 to 12 over the weekend, he said. In the present environment developers could wish to save their ammunition for better sites in more centrally located and prestigious locations," said Knight Frank's Chan.

Up for tender, he said, was the HK$33 billion Nam Cheong station commercial and residential project on top of the MTR station in Sham Shui Po, a residential site in Ho Man Tin, and another at Mount Nicholson. The tender for the Nam Cheong site closes on May 25, while the Ho Man Tin site will be offered for auction next month and the Nicholson site will come under the hammer in July.

Chan said developers would be keen to bid for the Nam Cheong project and the luxury site at Mount Nicholson, given their prime locations which would help reduce risk exposure.

But his revised forecast nonetheless remains HK$1 billion more than forecasts made by less bullish analysts, and Nelson Chan Cheong-kit, a director at Lanbase Surveyors, is sticking with his original view that the site will sell for HK$3.6 billion or around HK$2,500 per sq ft, the lowest among the forecasts.

Lanbase's Chan said he did not believe that the deterioration of global market sentiment would effect the land sale much as development of the site would take two to three years to complete.

But he agreed that bidding for the site could be affected by the increased attraction of alternative choices to developers. "The concern is that developers may now shift their interest to other sites up for grabs," he said.

The Tung Chung site was triggered for tender -- the first government land sale since December last year -- after a developer agreed to pay the minimum list price of HK$2.87 billion.

But sentiment has been dampened by warnings from the government that it might introduce tougher measures aimed at curbing property speculation, including an increase in stamp duty on non-luxury flats, a ban on reselling unfinished homes -- a practice popular with speculators who try to "churn" their purchases before taking occupation -- and requiring developers to put all flats up for sale within a certain period. – South China Morning Post

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