Hong Kong’s MTR Corporation has awarded a residential development in a southern district of the city to a consortium formed by Kerry Properties, Swire Properties, and Sino Land.
The trio of local developers is reported to be paying a HK$6.76 billion land premium for the plot, which occupies the site of a former logistics depot next to the Wong Chuk Hang MTR Station.
The award comes five days after the MTR Corporation announced that it had taken in only six bids for the project through a public tender after receiving 38 expressions of interest.
The lukewarm showing coincides with a property downturn in the Asian financial hub that prompted the Hong Kong government to relax mortgage rules 12 days ago to revive the market.
Shouldering off CK Asset, Henderson and Wheelock
The new prize for Kerry, Swire and Sino Land allows for development of two apartment blocks comprising a total of 800 units, with an expected completion date of 2025.
Based on the proposed gross floor area of 638,305 square feet, the consortium is paying HK$10,587 per square foot for the project. Neither the MTR corporation nor the successful bidders have released financial details of the tender. All three companies in the consortium are well familiar with the area two stations from Admiralty on the MTR’s South Island line, with Sino Land and Kerry having teamed up with the rail operator for one of the earlier Wong Chuk Hang sites and Swire having launched the South Island Place project last year.
At the reported price, the site would be the most expensive of the four residential plots in Wong Chuk Hang to have been sold by the MTR Corporation on a price per square foot basis, according to local media.
In August of last year, Li Ka-shing’s CK Asset won a tender for the third portion of the Wong Chuk Hang project after it agreed to pay a reported land premium of around HK$12.97 billion for the 240,900 square foot site.
The MTR sold phase two of the south island project to a joint venture between Kerry and Sino Land in December of 2017 after the rail operator had sold the first slice of the site to a joint venture between China’s Ping An Real Estate Capital and Hong Kong’s Road King Infrastructure for an estimated HK$8 billion to HK$9.8 billion in early 2017.
As with the earlier three projects in Wong Chuk Hang, the developers of this fourth phase will need to hand over 25 percent of any profits derived from the eventual sale of homes developed on the site. The consortium is estimated to be investing a total of HK$11.8 billion in the project, inclusive of the land premium.
Despite the slowing market and the need to share income with the MTR, Sun Hung Kai Properties, CK Asset Holdings, Henderson Land Development, Great Eagle Holdings, and a consortium formed by Wheelock and Company, Chinachem Group and China Overseas Land & Investment were all reported to have put in rival bids.
Buying During a Property Slump
The MTR’s Wong Chuk Hang sale comes off the back of four consecutive months of falling house prices in the world’s most unaffordable city.
Sales of luxury homes in Hong Kong have been declining steady since April according to a statement last week from Savills. “With lacklustre activity levels, luxury residential prices receded across the board in Q3/2019, with luxury apartment prices on Hong Kong Island slipping by 1.7 percent while Kowloon / NT fell by 1.5 percent,” the property consultancy said in a statement.
Even policy changes brought in by the government, which will allow first time buyers in the mass market segment to borrow up to 90 percent on flats worth up to HK$8 million and up to 80 percent on flats valued up to HK$10 million, are not expected to reverse the decline.
JLL’s October Market Monitor noted, following the policy announcement, that over the near term housing prices were expected to continue to slide, adding that the volume of residential property transactions in Hong Kong during September fell to HK$27.7 billion — down 25 percent from August.
JLL’s senior director of capital markets in Hong Kong, Henry Mok, explained that the government’s plans were unlikely to solve all of the housing market’s ills.
“We believe the current weakened domestic sentiment and persistent downside risks in the local economy will ultimately offset any benefit from the relaxation of mortgage rules,” Mok noted.
Note: An earlier version of this story indicated that the winning consortium is paying the equivalent of RMB 10,587 per square foot for the project. The post has since been updated to show the intended amount, HK$10,587 per square foot.