Hong Kong’s Lands Department on Wednesday announced that a plot of residential land on what had been the runway of the city’s former Kai Tak Airport has been awarded to local development giant, Sun Hung Kai Properties, for HK$11.26 billion ($1.43 billion).
The builder’s winning bid for this fourth site to be auctioned on the artificial peninsula in Victoria Harbour within the last year, came at the equivalent of HK$17,360 per square foot, within the range expected by property surveyors in the city.
The sale of the luxury site comes as some analysts in the city are already predicting a rebound in property prices, with analysts from CLSA saying today that they expect home prices could rebound by as much as 15 percent after hitting bottom “within the next month or two.”
Harbour Views Bring a Premium
Sun Hung Kai is buying the 10,956 square meter (117,900 square feet) parcel at a price more than 28 percent higher per unit of area than its competitor, China Overseas Land & Investment (COLI), had paid for a nearby site in December, which the mainland developer purchased for the equivalent of HK$13,523 per square foot. However, the Hong Kong development giant was still able to obtain the site for around two percent less than the HK$17,776 per square foot that it had paid for a HK$25.16 billion mixed commercial-residential site in the northern tip of the Kai Tak redevelopment area last May.
Sun Hung Kai’s acquisition fell within the HK$10.4 billion to HK$13 billion range which had been predicted by property surveyors, who had allowed for a potential value of HK$16,000 to HK$20,000 per square foot for the plot. The higher price for this site compared to other land sales in recent months reflected both confidence among developers regarding market prospects, and a premium for the site’s unobstructed views of Victoria Harbour, according to remarks by Knight Frank executive director Thomas Lam, as cited in the South China Morning Post.
At a plot ratio of about 5.5 times, the land parcel can be developed into a maximum gross floor area of 60,258 square metres (649,000 square feet). Completed apartments on the site could be expected to sell for more than HK$30,000 per square foot, Knight Frank estimated.
CK Asset, Kerry and More Joined the Bidding
Despite the property’s view of the Hong Kong skyline, only six bids were made for the 50-year land grant parcel, below the market expectation of seven to 10 bids.
Sun Hung Kai outpaced solo bids by CK Asset Holdings, Kerry Properties, and Kingboard Investments, as well as a joint venture between K Wah International and Sino Land, and a consortium comprising Wheelock Properties, China Overseas Land & Investment, Chinachem Group, Empire Group, Henderson Land Development and New World Development to win the tender. The developer now says it will invest about HK$20 billion into its new prize to build what it calls an “iconic, luxury harbourfront development,” where every flat can enjoy an ocean view, according to the SCMP.
Jutting out into Victoria Harbour, the former landing strip has already yielded a trio of residential plots within the last year.
In addition to COLI’s bargain HK$8.03 billion ($1.03 billion) parcel opposite Sun Hung Kai’s, in November, Pan Sutong’s Goldin Group had paid HK$15,497 per square foot for a site adjoining COLI’s just weeks after a consortium of Henderson Land, New World Development, Wheelock & Company and Empire Group had paid HK$14,502 per square foot for their own chunk of the runway.
Hong Kong Market Expected to Revive
Sun Hung Kai’s land purchase was announced on the same day that investment bank CLSA released a report indicating that, while prices have already slid some 10 percent from their 2018 peak, they may soon recover.
“Market dynamics have shifted,” the bank’s analysts said in a research note. “Weekend viewing has been up 40% in the last four weeks. Secondary transaction volume has returned to two-year average, and more transactions are made above bank valuation.”
Despite the more optimistic picture, CLSA projected that, in the best-case scenario, home prices would still end 2019 at two percent below their 2018 peak.