The impending sale of a waterfront site on Central’s waterfront may be grabbing the attention of Hong Kong real estate watchers, but the government also this week announced plans for a second attempt at selling a luxury residential site on Victoria Peak by the end of this year.
The city’s Lands Department said early this week that it will sell off a 1.25 hectare (134,500 square foot) plot on Mansfield Road on Victoria Peak, with that parcel representing a slice of a 1.76 hectare luxury site which the government had failed to sell in a previous land auction in October 2018.
Should the site tender prove successful this time, it would mark the first sale of a parcel in Hong Kong’s most prestigious neighbourhood since 2011, as well as provide a measure of developer appetites in a city where prices of homes have been falling since the same month that the government first tried to auction the Peak plot, according to JLL.
In a statement, Hong Kong’s Secretary for Development Michael Wong said that by divvying up the luxury site, “the Government hoped to encourage bidding by developers of different sizes.”
Adjusting for the Mood
“The site area of the old Mansfield Road plot was about 189,400 square feet when the government released it for tender. Only a few developers could afford that kind of investment,” said Dorothy Chow, senior director of valuation and advisory at JLL in Hong Kong.
The sale attempt comes soon after an August survey of Hong Kong property professionals showed that demand for housing on Hong Kong island had fallen at its steepest rate since March.
The study by the Royal Institute of Chartered Surveyors and real estate website Spacious also found that home prices in August fell at their fastest pace since April, with 10 percent of the brokers and developers polled saying that home prices had fallen by more than 8 percent within the last three months.
In an attempt to tailor the Peak parcel to the more pessimistic mood, the government is now allowing potential buyers to build taller by having boosted the plot ratio to 2.1. That alteration of the earlier plan would allow for construction of up to 269,000 square feet of housing, with the government specifying development of up to 240 homes.
Planning for Scarcity
The government’s previous attempt at selling the Mansfield Road site was cancelled in October 2018 when the five developers which tendered for the site failed to reach the auction reserve price of HK$32.3 billion ($4.17 billion).
JLL’s Chow argues that the decision to split the site should help ensure a successful sale, especially at time when Hong Kong is facing challenges on a number of fronts.
With the coronavirus having added to existing political and social woes, sales of luxury homes fell 42 percent in August, compared to July, JLL said. Despite that downward trend the agency expects demand for the Mansfield Road site to be buoyed by its rarity and tight supply of high-end housing in the market.
As of September, JLL estimated new supply of luxury homes in Hong Kong to total 1,400 units through 2022, with senior director of capital markets Henry Mok noting that, “Developers remain keen on acquiring luxury residential sites due to the limited new supply of luxury residential and tight land supply for luxury residential development.”
Mansfield Road is the first Peak plot to come into the government pipeline since Cheung Kong (now CK Asset) acquired a Borrett Road parcel for HK$11.65 billion in 2011. Just last month however, Hang Lung Properties picked up 37 Shouson Hill Road, in Southern District, for HK$2.57 billion — a price that was around 25 percent less than estimates earlier this year.