CK Asset Holdings, the development flagship of billionaire Li Ka-shing’s business empire, has taken a step towards replenishing its thin project pipeline after topping 15 rival bids to secure a residential plot in the New Territories for a greater-than-expected HK$716 million ($91.8 million).
The government tender for the 50-year land grant plot at Lau Yip Street and Chung Yip Road in Yuen Long attracted a total of 16 bids from developers including CK Asset’s local rivals Sino Land, Far East Consortium, K Wah and Sun Hung Kai, as well as mid-sized mainland builder CIFI.
The market value had been estimated in earlier media reports at between HK$470 million and HK$630 million (HK$6,000 to HK$8,000 per square foot), and CK’s enthusiasm for the site is “a clear indication of strong developers’ interest in residential projects”, said KB Wong, executive director and head of valuation and advisory services at Cushman and Wakefield, Hong Kong.
With interest rates at an 11-year low, Hong Kong has seen a revival in home sales, with developers selling over 24 percent more homes in June than they had in May, according to research by Knight Frank. In the luxury housing segment, prices grew by 3.9 percent during the first six months of 2021, while some new mass market projects have quickly sold out their available units at new launches.
Low Rise Luxury
With developers gaining new courage to pursue housing plots in the world’s most expensive housing market, CK Asset executive director Grace Woo told the South China Morning Post that the developer plans to build low-rise luxury villas on the land, as the group controlled by Hong Kong’s richest man looks to boost fading city sales generated mostly by the remaining residential units of completed projects.
The site can yield a maximum gross floor area of 78,575 square feet (7,300 square metres), meaning CK Asset is paying HK$9,112 ($1,170) per square foot of GFA.
With two more bids than the 2016 relaunch of the Yuen Long Au Tau site, the 15,208 square foot plot broke the record for the highest number of bids for a parcel in the western New Territories district near the Shenzhen border, offering fresh evidence of improving market sentiment.
The tender for the Yuen Long plot came three weeks after Wheelock Properties bested 11 rival bids to win a development site in the northern New Territories hotspot of Kwu Tung for an above-market HK$4.19 billion (HK$8,499 per square foot of built area).
The recent tender results reflect the most active residential market seen in the city in years, Cushman & Wakefield’s Wong said.
“The prevailing interest rate (remains) at a historic low level and the market is filled with high liquidity,” he added. “The economy is gradually recovering and we can see an improving employment situation and retail consumption.”
CK Refills Pipeline
Ranked as Hong Kong’s second-largest developer by market capitalisation, CK Asset said in a filing with the stock exchange earlier this month that the company’s revenue from property sales fell 24 percent in the first six months of 2021. The recognised revenue mostly came from the remaining units of completed projects.
In Hong Kong, revenue from property sales was HK$8,941 million last year, down from HK$50,020 in 2019, according to the company’s 2020 annual report.
CK Asset currently has two local residential projects scheduled for completion in 2021, both of which are joint ventures. Sea to Sky, located in Tseung Kwan O in the New Territories, has 1,044,104 square feet of housing, and Seaside Sonata, in New Kowloon, adds 595,702 square feet.
In February, the company won a residential site at the former Kai Tak airport runway, which will yield a maximum gross floor area of 648,138 square feet, with a bid of HK$10.28 billion.
With the hospitality sector’s decline, the property flagship of billionaire Li Ka-shing also announced in August that some of its hotels would be converted for residential use as the city’s home prices rise at record levels.
Located near the Tung Tau industrial area and about a kilometre away from both Yuen Long and Long Ping MTR stations, the Yuen Long site’s suitability for affordable suburban luxury fit it into what some analysts see as a growing segment of Hong Kong’s high-rise-dominated housing market.
Alkan Au, senior director of valuation at JLL Hong Kong, said CK Asset’s bid reflects the “marketability of low-rise residential developments”, with the site expected to yield around 112 homes.
“It’s not (surprising) that developers are aggressive in biddings,” Au added. The site’s proximity to the Shan Pui River is also seen as adding value in its suburban setting.
Yuen Long, a popular area among “new Hong Kongers” from north of the border, has not had a government land sale since the first three months of 2019, according to Au. That most recent plot sold was in Tai Kei Leng and was purchased at a price of HK$4,977 per square foot of housing.
In 2017, a consortium formed by Sino Land, K Wah Group and China Overseas Land and Investment won development rights for a residential project in Yuen Long at the price of HK$8.33 billion, reported the South China Morning Post.
Editing by Christopher Caillavet