Deep-pocketed giants from mainland China showed off their growing dominance of Hong Kong’s property sector again on Tuesday when a joint venture between Ping An Real Estate Capital and Hong Kong’s Road King Infrastructure bested 13 other bidders to win a site on the city’s South Island MTR line.
While no price was disclosed by the MTR Corporation, which yesterday announced the results of the competition for the site adjacent to the Wong Chuk Hang metro station, industry analysts estimate that the joint venture led by the real estate investment arm of China’s Ping An Insurance group paid between HK$8 billion and HK$9.8 billion (US$1.26 billion) for the site.
Ping An Outbids 13 Other Developers
Winning the rights to co-develop the residential project with the MTR Corporation required Ping An and its local partner to win out over competing bids from Hong Kong developers including Cheung Kong Property, Kerry Properties, Sino Land, Sun Hung Kai Properties, Henderson Land Development, and a consortium led by New World Development. The insurance company affiliate also outbid mainland players China Resources Land, China Overseas Land & Investment, Logan Property and a division of China Vanke.
If Ping An and Road King have agreed to pay as much as HK$9.8 billion for the site, which is planned to yield as many as 800 apartments totalling 576,950 square feet, then they would be paying around HK$17,000 per square foot for the land. The joint venture will also need to share 35 percent of the profits from the highly structured project with the MTR Corporation.
Mainlanders Take Another South Island Site as Dominance Grows
The deal at Wong Chuk Hang comes just a few days after another mainland group made Hong Kong’s most expensive land purchase ever less than 3 kilometres away.
A joint venture belonging to Hong Kong-listed mainland developers, KWG Property Holdings and Logan Property Holdings agreed on Friday to pay a record HK$16.86 billion (US$2.17 billion) for a waterfront residential site on the city’s Ap Lei Chau island. The pair of mid-sized Chinese developers are paying the equivalent of HK$22,118 ($2850) per square foot of gross floor area for the site, with analysts predicting that they will need to charge more than HK$43,000 per square foot for the finished housing in order to turn a profit.
The two acquisitions by mainland companies in less than a week underlines the growing dominance of the Chinese firms from outside of Hong Kong in the city’s housing market.
A report released yesterday by international property consultancy JLL found that the percentage of Hong Kong residential development sites won in public land auctions by seven of Hong Kong’s largest developers had shrunk from 45 percent in 2012, to 28 percent in 2014 and 22 percent in 2016, due to competition from mainland firms and more aggressive bidding by mid-sized players.
The agency projects that the seven heavyweights – Sun Hung Kai Properties, Cheung Kong Property, Henderson Land, Nan Fung Group, New World Development, Sino Land and Wheelock Properties – can expect that their share of total private housing completions will decrease to 53 percent between 2017 and 2019, from 84 percent in 2014 and 77 percent in 2016, based on historical trends and current data.