HONG KONG: Sun Hung Kai Properties on Tuesday, June 8 paid the second-highest price ever for a development site, helping to lift confidence in the recently depressed luxury residential market.
SHKP, the largest developer in terms of asset value, bought the site in Ho Man Tin for HK$10.9 billion (RM4.65 billion), or HK$12,540 per square foot - exceeding the HK$10.6 billion maximum market-watchers had expected and beating by at least 47% the government's reserve price.
The most expensive site sold was a plot in Siu Sai Wan which went to Sino Land for HK$11.82 billion in 1997 and on which it built Island Resort.
"I was in shock," said Nicholas Brooke, the chairman of Professional Property Services, who had forecast the site would fetch slightly less than HK$10 billion. The auction result "reflects the fact that developers believe a lot of wealth will be interested in this region and mainland China. They believe the prices (of luxury residential property) will continue to go up under the tight supply," he said.
Brooke expects vendors of luxury flats now will be aggressive in their asking prices, while buyers will have to pay a premium price for the flats. The auction result will have a knock-on effect on the mass residential market, but he believes there is limited scope for prices to rise.
The average price of luxury flats in Ho Man Tin is HK$12,000 per sq ft currently. The site attracted eight bidders including Cheung Kong (Holdings), Kerry Properties and New World Development. As the land price is higher than existing property prices in the area, developers forecast significant growth in property values in the near future.
Charles Chan Chiu-kwok, the managing director at Savills, estimated that prices at the project would have to reach HK$15,000 to HK$16,000 per sq ft to generate a reasonable profit. Two hours after the site was sold, Cheung Kong (Holdings) relaunched its Celestial Heights project in the same district.
Daniel Chang, a manager at Midland Realty, said a flat owner at King's Park Villa in the area also raised the asking price of his flat by 6% to HK$16.5 million. Another vendor at Celestial Heights, who had planned to lower the asking price of his flat, "is not willing to cut the price now", Chang said.
Victor Lui Ting, the executive director at Sun Hung Kai Real Estate Agency, said the total investment cost of the project was about HK$18 billion. "The land price is not cheap, but it's still reasonable. It is located in a prime location and close to the MTR station which will be built in future. The site is also big enough to develop a large-scale luxury project."
The 173,849 sq ft site could provide a total gross floor area of 869,247 sq ft. It is about five minutes' walk to the proposed Ho Man Tin station along the Sha Tin-Central MTR link due to be completed in 2019.
Surveyors are now more optimistic about an auction of a luxury site in Mount Nicholson Road on The Peak at the end of next month. — South China Morning Post
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