China Resources Land, Poly Developments Win Kai Tak Site for HK$12.9B

Hong Kong’s Lands Department announced on Wednesday that a joint venture between China Resources Land and Poly Developments won a tender for the second-biggest parcel of land on the runway of Hong Kong’s former Kai Tak airport for HK$12.9 billion ($1.65 billion).

The final price, equivalent to HK$18,080 per square foot, was lower than the HK$14 billion expected by valuers and about 8 percent cheaper than the adjacent Area 4C Site 2 Parcel sold for on 7 May.

“Although the accommodation value of the parcel is lower than that of the adjoining site awarded in May, it is still within the range of market forecast,” KB Wong, executive director of valuation and advisory services at Cushman & Wakefield Hong Kong told Mingtiandi.

Wang noted that escalating US trade tensions and the recent political unrest in Hong Kong may have played a role in the lower-than-expected price, but the site sale still still as the second biggest land transaction ever in the Kai Tak area, following only a mixed-use site Sun Hung Kai Properties acquired in May last year for HK$25.16 billion.

Sale Postponed After Goldin 180

Located by the shorefront with an unblocked view of the Victoria Harbour, the 9,481 square meter oceanfront site has the second largest maximum developable area among all sites on the former runway. It can yield up to a maximum gross floor area of 66,367 square meters of housing, which is expected to sell for at least HK$33,000 per square foot.

The sale, postponed last week amid the downbeat sentiments and the heightened political volatility over an unpopular extradition bill, was announced two weeks after Goldin Financial forfeited a HK$25 million deposit when it abandoned its HK$11.1 billion purchase of a commercial site on the former Kai Tak runway, citing the city’s economic and social instability as motivation for its decision.

The China Resources – Poly partnership topped five Hong Kong developers, including solo bids by CK Asset Holdings and Sun Hung Kai Properties, as well as a joint venture between China Overseas Land & Investment and Wheelock Properties, and a second team bid from K Wah International Holding, Sino Land and Kerry Properties.

The willingness of mainland players to outbid their Hong Kong competitors could be a sign that developers from north of the city’s border remain optimistic on Hong Kong housing market over the medium-to-long term, according to JLL.

The property consultancy’s analysts sited the high profile of Kai Tak as a development hub as one of the reasons behind the China Resources Land-Poly bid, with mainland players also joining consortiums which won early tenders on the former airport site.

“We believe one of the reasons is most of the sites up for tender are in Kai Tak, which is a familiar market to many mainland developers and in a prime location. It led them to turn active this year,” Cathie Chung, senior director of research at JLL.

Developers Expected to Maintain Kai Tak Appetites

Downbeat sentiment has prevailed in Hong Kong’s property sector since mid May amid worsening US-China trade relations and controversy over the extradition law, however, a report released by JLL on Thursday predicted that developers will remain keen in acquiring sites in Kai Tak because only two harbour view residential sites remain to be tendered on the former runway.

While cautioning on the short term outlook, Wong of Cushman & Wakefield said that Hong Kong’s property market will be able to withstand the impact from the trade war and other negative factors so long there is no fundamental change to the pillars of Hong Kong as an international financial hub.

“We expect a drop in home sales volume, especially in the secondary market, and price consolidation over the remainder of the year as more potential buyers will remain on the sidelines against uncertainties,” he added.