New floor area rules overshadow next auction

HONG KONG: Bidding for a luxury site to be auctioned in Kowloon Tong on Wednesday will take place under the shadow of new rules capping the amount of common space that may be added on to a development to 10% of its permitted gross floor area (GFA).

The site in Inverness Road, on the periphery of Kowloon Tong near Kowloon Tsai Park, is expected to fetch bids of between HK$2.5 billion and HK$2.7 billion (RM1 billion to RM1.08 billion), or about HK$11,000 to HK$11,861 per square foot.

That will fall well short of the HK$17,976 per sq ft, or HK$1.6 billion, paid by the Chinachem Group for another luxury residential site at 3 and 5 Ede Road in Kowloon Tong in the middle of October. The Chinachem bid set a record for residential sites in Kowloon in terms of price per square foot.

But though developers remained keen to acquire luxury residential sites, some analysts said the new rule on inflating floor area would affect the price they would be prepared to pay for the site in Inverness Road.

Alvin Lam, a director at Midland Surveyors, said developers would take the new rule into account when bidding and his forecast of HK$2.5 billion was at the low end of expectations.

But surveyor Albert So Chun-hin believed the new rule would not have much impact on the bidding.

"There will be enough time for the winning bidder to obtain an approval for a building plan from the Buildings Department before the new rule comes into effect in April next year," he said. Even when the new rule was in operation he did not believe it would overly concern developers.

Under the new policy, facilities and features such as balconies, utility platforms and clubhouses — previously exempt from GFA calculations — should now not exceed 10% of the gross floor area of a development.

That is expected to affect the saleable space of a development since such areas are pro-rated into the per square foot price calculations made by developers when they sell apartments.

"The site is not located in the core Kowloon Tong area, but the surrounding environment is pleasant and units on higher floors will offer open views and the site could still be developed into low-density luxury residential units," said Charles Chan Chiu-kwok, managing director at Savills Valuation and Professional Services for Greater China.

Chan expects the site will bring in HK$2.7 billion in land revenue for the government.

"The project could be packaged as a luxury project, which can fetch higher property prices," So said.

"And it is not easy for developers to get a big site in an urban area. It will attract major developers to join the bidding."

He said the selling price of the project could reach about HK$20,000 per sq ft when it launches in a few years.

The 75,843 sq ft site could provide a total gross floor area of 227,529 sq ft.

The Lands Department accepted a developer's minimum guaranteed bid of HK$1.716 billion or HK$7,542 per sq ft for the lot in September. That offer will open the bidding at the auction.  — South China Morning Post