Sun Hung Kai Properties has agreed to pay the largest sum ever at a government land sale in one of the world’s most expensive real estate markets when the listed real estate developer won a government tender for a residential site in Hong Kong’s Kai Tak area for HK$25.16 billion ($3.2 billion), according to an announcement by the city land office late on Tuesday.
The developer’s winning bid for Kai Tak Area 1F Site 1 at the site of Hong Kong’s former airport in Kowloon East exceeded by 46 percent the previous record price for a residential site in the city set when a consortium led by Sino Land bought a plot in Kowloon’s Cheung Sha Wan area for HK$17.28 billion last November.
The mammoth bid for the 178,000 square foot (16,537 square metre) site comes after private home prices rose for the 24th straight month in April. A government index of home prices broke record levels in 2016 and has continued rising since then, sparking new levels of competition among developers for fresh sites.
SHK Tops Four Competitors, Exceeds Analyst Estimates
“The transaction price is higher than previous estimates, a sign that Hong Kong developers have been land-starved for a long time,” said Thomas Lam, Senior Director at Knight Frank in an exchange with Mingtiandi. “The price also shows that developers are optimistic about the property market and the development of Kai Tak area.”
The winning price of HK$25.16 billion exceeded market expectations of up to HK$21 billion by at least 20 percent.
The losing bidders included Victor Li’s CK Asset Holdings; Henderson Land Development; a consortium formed by Sino Land Kerry Properties, K Wah International and Lifestyle International; and an additional joint bid by Wheelock Properties, Chime Corporation, New World Development and China Overseas Land & Investment.
Kai Tak Site Could Yield 1600 New Homes
The Kowloon East plot is situated at the northern tip of the Kai Tak redevelopment area and can yield up to 1.4 million square feet (131,457 square metres) of floor area, which translates into 1,400 to 1,600 residential units.
Lam expects the project to be a luxury home development involving a total investment of HK$38 to 40 billion. The completed units could fetch at least HK$32,000 per square foot, he added.
The site is said to be well located as most of the residential plots in the north of Kai Tak have been sold already, and the area will have soon have amenities completed for residents as well as being convenient to the future Kai Tak MTR station.
According to the tender requirements, the winning developer must also build two elderly day care centres of at least 3,853 square feet each, as well as a pair of residential elderly care homes each with a floor area of no less than 26,640 square feet. The elderly care properties are to be returned to the government when completed.
Two Land Sale Records Fall in One Day
The newly transacted Kai Tak site grabbed the crown for the city’s most expensive residential land, blowing past the total price tag for the 208,260 square foot parcel New Kowloon Inland Lot No 6549 in Cheung Sha Wan. The private residential plot was awarded to a consortium of Sino Land, Wheelock Properties, K Wah International and SEA Holdings for HK$17.28 billion last November.
The Kai Tak Area 1F Site 1 residential plot also won the title of Hong Kong’s most expensive land ever sold via public tender, edging out the commercial site New Kowloon Inland Lot No. 6556 awarded to Nan Fung Development for HK$24.6 billion last June. The 204,988 square foot site is set to be developed into a commercial development including office, retail and hotel.