Nan Fung wins HK site at price far below forecast

HONG KONG: Property developer Nan Fung Development won a Hong Kong residential site for less than expected last Thursday, May 6, with many developers staying on the sidelines as auctioneers repeatedly threatened to withdraw the site from bidding.

Nan Fung paid HK$3.42 billion (RM1.41 billion) for the land, far below a consensus forecast of HK$4.55 billion from nine analysts polled by Reuters, as sentiment was dampened by the latest global credit turmoil and the government's recent move to limit speculation in the housing market.

The property sub-index of Hong Kong's blue chips fell as much as 3.1% due to the cool response to the auction before recovering slightly to a 2.4% loss at 0723 GMT, On May 11, underperforming the broader Hang Seng Index's 1.7% fall.

The price was only 19% above an open bid of HK$2.876 billion for the waterfront site in Tung Chung, Lantau Island. The site offers a gross floor area of about 1.44 million sq ft.

Only three developers made bids, including New World Development, with Nan Fung left the lone bidder in the last 20 minutes of the auction.

"Developers are behaving the way they are because they're probably protesting against government moves to cool the property market in the past couple of months," said Trevor Cheung, analyst at BNP Paribas.

Property prices in Hong Kong have risen about a third since January last year, fuelled by exceedingly low mortgage interest rates, an influx of foreign capital into Hong Kong real estate and low housing supply.

"Definitely, we'll need some consolidation in property prices because they've already climbed too much in the first quarter," said Cheung. "But a single land auction isn't going to dramatically alter the outlook for the entire real estate market."

Nan Fung planned to invest a total of HK$6.42 billion to develop the site, a company executive told reporters after the auction.

Some analysts revised down their forecasts for the site by by as much as 10% just before the auction following government measures aimed at stabilising housing prices and preventing asset bubbles. -- Reuters