Sun Hung Kai Wins Site in Hong Kong’s Tai Po for HK$6.31B

Hong Kong developer Sun Hung Kai Properties has won a residential parcel in Hong Kong’s New Territories for HK$6.31 billion ($804 million), according to an announcement by the city’s Lands Department, snatching up the Tai Po project for a higher than expected price, according to industry analysts.

The acquisition of the 32,900 square meter (354,132 square foot) site was the development giant’s second successful purchase at a government land tender in less than a month, following its winning bid for a plot on the runway of Hong Kong’s former Kai Tak Airport in late January.

This latest sale comes amid conflicting predictions regarding the future trajectory of the most expensive housing market in the world, after a director of one of Hong Kong’s largest developers last week predicted that home prices in Hong Kong could fall by as much as 20 percent over the next two years.

SHK Triumphs Over Nine Competitors

The sale of Tai Po Town Lot No. 244 at the junction of Yau King Lane and Pok Yin Road in Pak Shek Kok translated to HK$6,646 per square foot of accommodation — around 69 percent higher than Sino Land had paid in 2016 for the most recent site auctioned in the area. A total of 10 bids were submitted for the site in Tai Po’s Pak Shek Kok area in the tender process.

At a plot ratio of 2.68 times, the land parcel can be developed into a maximum gross floor area of 949,376 square feet of homes, and, under the conditions of the tender, Sun Hung Kai will also be required to construct a care home for the elderly of at least 14,575 square feet.

SHK’s winning bid outpaced solo offers from CK Asset Holdings, Henderson Land Development, Wheelock Properties, K Wah International, K&K Property Holdings, Star Atrium Ltd, CITIC Pacific Ltd, Far East Consortium International Ltd and a joint bid between China Overseas Land & Investment Ltd and Sino Land. Sun Hung Kai says it anticipates investing about HK$12 billion into the new project, according to the South China Morning Post.

This latest purchase comes after Sun Hung Kai last month won a 10,956 square meter parcel on what had been the runway of the Hong Kong’s former Kai Tak Airport for HK$11.26 billion, to build what it calls an “iconic, luxury harbourfront development.”

Homes Expected to Sell for Up to HK$20K Per Square Foot

Hannah Jeong, head of valuation and advisory at Colliers International in Hong Kong, was cited by the SCMP as saying that Sun Hung Kai would likely enjoy a healthy profit margin on the development, despite the land price exceeding the upper threshold of expectations and the added costs from building the associated public facilities.

Completed apartments on the site could be expected to sell for between HK$16,000 to HK$20,000 per square foot, Jeong estimated.

Knight Frank had previously valued the plot at between HK$5.2 billion and HK$6.2 billion, or HK$5,500 to HK$6,500 per square foot. The higher-than-expected price reflected that developers are still confident on the market outlook, said Knight Frank executive director Thomas Lam.

“The environment at the site is quiet. The large size also means relatively high flexibility in designing the development,” Lam told the SCMP.

Future of Hong Kong Market Disputed

Sun Hung Kai’s acquisition of the Tai Po site comes as analysts and developers offer dueling predictions regarding the outlook for Hong Kong’s housing market.

Just last week, Justin Chiu, a director of development heavyweight CK Asset, predicted that housing prices in the city would fall 10 percent in 2019, with another eight to ten percent decrease in value expected in 2020. However, analysts from investment bank CLSA last month went on the record as expecting home prices to rebound by as much as 15 percent after hitting bottom “within the next month or two.”

Hong Kong’s home prices fell nine percent from July to December and pushed 262 homeowners into negative equity in the fourth quarter of last year. It was the first time in two years that some property values had dropped below outstanding mortgage loans, the Hong Kong Monetary Authority said earlier this month.