Site sales will put off flat buyers, market says

HONG KONG: The planned sale by the government of five housing plots between October and December will further dampen property market sentiment even though they will yield fewer flats than sites sold earlier this year, analysts say.

"With a flood of new land supply and project launches hitting the market over the next three months, we envisage that buyer sentiment in the residential market will take another negative turn," Samsung Securities' analyst Patrick Wong Chi-leung and his team noted in a research report.

Secretary for Development Carrie Lam Cheng Yuet-ngor announced on Friday the sale by tender of the five plots, and said their development would provide some 1,770 flats.

This compares with the eight sites being sold in the current quarter, which are expected to yield 6,000 flats, and the nine sites sold between April and June, which will add about 3,000 flats to the housing stock.

The sites being offered in the coming quarter will be sold by tender instead of at auction, given the lacklustre response from developers to recent land auctions. Two weeks ago, a site at Tseung Kwan O was sold at auction for HK$3.12 billion (RM1.25 billion), 2.5% below the lowest forecast and 24.3% below the highest forecast. That followed the sale of a site for luxury housing in Kau To, Sha Tin, and that of a commercial-residential site in North Point's Oil Street, both of which fetched prices below market forecasts.

Despite the poor results, the government has pledged there will be a continuing supply of land for construction. It hopes to make two more sites at the Tsuen Wan West station on the West Rail Line available for sale in the next three months. These will provide 3,326 flats.

"The government has bowed to political pressure to maintain a steady supply of land," said Dr Lawrence Poon Wing-cheung, a spokesman for the Institute of Surveyors. "This will affect developers. Given the new and continuing supply, as well as the uncertain economic situation, the prices of these newly available sites will be low."

Joyce Kwock, research analyst at Credit Suisse, said the fact that the government was willing to sell five sites for housing in the present economic climate showed it did not mind selling the sites at a discount.

Of the five sites up for sale in the coming quarter, two, in Tseung Kwan O and Tuen Mun, will be sold subject to a condition that a the buyers build a minimum number of flats on them. Some surveyors say this will also affect the prices of the sites — with developers likely to bid less than they otherwise would — as well as the prices of the completed flats.

The remaining three sites are on Lantau Island and have been earmarked for low-rise development.

Midland Surveyors expects the five sites to sell for a total of HK$5.16 billion, but Centaline Surveyors forecasts the Tseung Kwan O and Tuen Mun sites alone will sell for a combined HK$5.8 billion.

The government will also sell by tender a commercial site in Sha Tin offering 351,979 square feet of gross floor area, and a hotel site in Hung Hom, which could provide around 750 rooms, by the end of this year.

According to data from Samsung Securities, developers spent more than HK$53.7 billion to acquire 20 sites via government land auctions or tenders from January to Sept 16, 26% more than the HK$42.6 billion revenue from land sales in the whole of last year. It believes developers may put 4,600 new homes on the market before the end of the year.

Louis Chan Wing-kit, managing director for residential sales at Centaline Property Agency, said most of the sites to be sold in the coming quarter would boost the supply of small and medium-sized flats in the New Territories. As a result, the prices of existing smaller flats in those areas would fall by 3% to 5%, he said. — SCMP