After a record-breaking land sale at Victoria Peak just before year-end, Hong Kong authorities are boosting the supply of residential plots coming to market in the next three months, despite ongoing uncertainty in the housing market.
The city’s secretary for development Michael Wong, announced on 29 December that the Lands Department will offer up three residential sites capable of yielding 2,240 homes during the final quarter of its financial year, which ends on 31 March.
By homes yielded, that land sale plan is up by more than 20 percent from the same period in 2020, with the government-controlled MTR Corporation also planning to auction off a site that would provide another 750 units during the quarter. The government also expects that another five private or redevelopment projects will win approval for residential development during the quarter, bringing the total future home supply generated during the quarter up to 4,800 units in total.
“The Government would continue to increase land supply through a multi-pronged approach in order to maintain a sustained and stable supply and meet the housing, economic and social development needs of Hong Kong people,” the Lands Department said in a statement.
This upswing in land sales comes despite analyst estimates that home prices in the world’s most expensive real estate market are set to drop by 5 percent or more in the coming year, as the COVID-19 pandemic continues to drag down Hong Kong’s economy.
Sites on the Peak, in Kai Tak and Fanling
Of the sites set to be auctioned during the next three months is a 500 square metre (5,381 square foot) plot on the Peak’s Mansfield Road. That parcel is contiguous with a site which Wharf Holdings won on 23 December with a record-breaking HK$12 billion ($1.6 billion) bid.
“The recent Mansfield Road site underscores solid demand still exists for residential sites,” Thomas Lam, head of valuations and advisory at Knight Frank in Hong Kong said.
Also upcoming in the government programme is a one hectare (2.5 acre) plot on the former runway of the city’s Kai Tak airport site in Kowloon East and a 1.9 hectare (4.7 acre) parcel in the Kwu Tong section of the New Territories’ Fanling area.
KB Wong, head of valuation and advisory services in Hong Kong for Cushman & Wakefield sees the new land sale plan as tied to more to the city’s need for housing than to the recent sale at the Peak.
“The government’s tender program may not be affected by a single tender result,” Wong said. “It may be more tied to the government’s plan of ensuring adequate land supply for housing development and the timing of availability of sites.”
The upcoming MTR site is package six of the rail operator’s Wong Chuk Hang Station project, which is the latest tranche in an ongoing set of development tenders offered the company in the rapidly regenerating industrial area of Hong Kong island. The MTR had kicked off a tender process for package five in the project on 14 December, with expressions of interest due eight days later.
For the Wong Chuk Hang plot, residential sites along MTR lines are usually well-received,” Knight Frank’s Lam said. Given the size of the plot, he predicted that it would developers may form bidding consortia, although he added that, “We also expect they will also be relatively cautious amidst the fourth wave of coronavirus outbreak.”
Cushman & Wakefield’s Wong was more optimistic on the outlook for the latest slice of MTR’s South Island project.
“The environment of Wong Chuk Hang is improving with the gradual redevelopment of aged industrial buildings and the government has also recently mentioned its intention to invigorate Island South,” Wong said. “With all these favorable factors, the site will be a very much sought-after opportunity among developers and we would expect there will be keen market interest on it.”
Commercial Outlook Uncertain
In addition to the bulging residential pipeline, Hong Kong is having another try at auctioning off a commercial site in the coming quarter, after the Lands Department’s most recent two commercial tenders failed to produce a successful bid.
On the way during the next three months is a 1.5 hectare plot on Caroline Hill Road in Hong Kong island’s Causeway Bay area which is capable of yielding around 100,000 square metres of gross floor area.
“The site has its own strengths like good size for quality development and proximity to key commercial hubs on the Island,” Cushman & Wakefield’s Wong said. “But the office/retail property market has remained dull and may not recover within a short period of time.”
In a report issued late last month, Knight Frank predicted muted sentiment across most segments of the city’s property market in the coming year.
“Looking ahead, the high unemployment rate and the economic recession will continue to weigh on the housing market,” the agency said. The report predicted that housing prices would drop by 5 percent in the next 12 months, while forecasting that office rents will fall by 5-10 percent in Hong Kong’s core districts.