Property giant bets on soaring market

HONG KONG: The pause in the property market lasted for just one weekend.

Cheung Kong (Holdings) Ltd, the city’s second-biggest developer, bought two sites at auction on Tuesday, in Ho Man Tin and Hung Hom, for HK$7.61 billion (RM3.09 billion) — at least 20% higher than the market forecast.

“The government cannot manage, or come up with a formula, to reduce the pace of price growth,” said Nicholas Brooke, chairman of Professional Property Services.

The auction was meant to be a downbeat affair after government moves last Friday to tighten mortgage lending and resale rules and release more sites for auction. This led to a 50% drop in flat sales over the weekend and a fall in developer stocks of between 3% and 5%.

But Tuesday’s sales clearly show that the big developers, who are exerting a tighter grip on the market, expect prices to keep rising.

Li Ka-shing’s Cheung Kong and Sun Hung Kai Properties now account for seven out of 10 new homes sold in the city. That’s bad for prospective young homebuyers who are becoming increasingly disillusioned about ever being able to own a flat.

Financial Secretary John Tsang Chun-wah said home prices were approaching 1997 levels, the height of a bubble that was followed by a six-year slump. He said on Monday that the government would not hesitate to introduce further measures to curb price gains if necessary.

Brooke said the government may have to get tougher with speculators, such as charging them higher interest rates. He said last Friday’s measure had had little impact on the auction, given that rising prices were driven by liquidity and low interest rates.

The site in Argyle Street, Ho Man Tin, the former Civil Aid Service training centre, was sold for HK$4.1 billion, or HK$10,399 per sq ft — the second-highest land price in terms of floor area in Kowloon. It attracted six bidders, including Chinachem Group, Kerry Properties and Cheung Kong. The result encouraged developers to be more aggressive in the bidding for the Hung Hom site.

Even though part of the sea view at the site is expected to be blocked when two adjacent sites are developed, the property attracted bids from Sun Hung Kai Properties, Kerry Properties, Chinachem Group and Cheung Kong. The latter outbid the other developers with the 145th bid.

The site sold for HK$3.51 billion, or HK$9,597 per sq ft, higher than the HK$9,015 per sq ft price Cheung Kong paid for land on which it built the nearby Harbourfront Landmark in 1997 before the Asian financial crisis.

Brooke said the sale prices showed that developers expected property prices would continue rising.

Property agency Ricacorp Properties said vendors in Hung Hom had raised their asking prices by 8% to 10% after the auction. -- South China Morning Post
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