Luxury site sets Kowloon record at land auction

HONG KONG: A luxury residential site in Kowloon topped records at a land auction on Tuesday, Aug 31, underpinning the buoyancy of the runaway property market.

Property sales, which had fallen in response to recent government cooling measures, are now expected to rebound after Kerry Properties won the most expensive site in Kowloon in terms of floor area price.

Prices have exceeded estimates in land auctions held since the government introduced measures to slow the property market last month. Singapore joined Hong Kong in imposing anti-speculation measures this week, underscoring the risk of asset bubbles in Asia as record-low US interest rates and the region's economic recovery spur demand.

Kerry beat 15 other bidders to snap up the site at 1 Ede Road in Kowloon Tong for HK$1.285 billion (RM519.51 million), or HK$16,587 per square foot. This was 95% higher than the opening bid of HK$659 million and at least 17% above market expectations.

The previous record for Kowloon was set in June, when Sun Hung Kai Properties paid HK$12,540 per sq ft for a site in Ho Man Tin.

Ricacorp Properties said weekly sales at 50 big housing estates across the city fell 9% to a four-month low of 302 last week. Agents expect sales to pick up this week.

Hong Kong's home prices have surged about 45% since the beginning of last year, prompting a series of cooling measures including reducing the availability of mortgage loans for luxury and investment properties as well as tighter control on speculative selling.

Leo Siu, a senior sales manager at Midland Realty, said many flat owners in Kowloon Tong had raised their asking prices after the auction. "One vendor raised the asking price of his 2,652 square foot duplex flat at One Beacon Hill by 10% to HK$55 million. Another owner at the estate raised their asking price by 11% to HK$80 million."

Raymond So Wai-man, dean of the business school at Hang Seng Management College, said the record-breaking result would boost prices in the secondary market.

"Property sales have dropped in recent weeks as buyers worried the government may release a new series of cooling measures," he said. "The aggressive bidding shows developers believe the government will not release stronger measures and the record-breaking site in Kowloon Tong is positive news."

Both big and small developers were drawn to the 25,823 sq ft site, with bids from Chinachem Group, Wing Tai Properties, Kerry Properties, New World Development, Wang On Group, Nam Fung Development and Tai Cheung Holdings.

Surveyor Charles Chan Chiu-kwok said the construction cost of the project was about HK$3,000 to HK$4,000 per sq ft. The average price of the project has to reach more than HK$20,000 per sq ft to generate a reasonable profit.

Kerry Properties is part of the Kerry Group, controlling shareholder of the SCMP Group, which publishes the South China Morning Post. — South China Morning Post