Hong Kong’s Lands Department on Wednesday announced that a residential site on what was once the runway of the city’s Kai Tak Airport has been awarded to Hong Kong financial conglomerate Goldin Group for HK$8.9 billion ($1.14 billion).
The 9,708 square metre (104,496 square foot) residential plot is the second site to be sold on the former runway this month and is located to the northwest of an adjoining site which was purchased by a consortium comprised of Henderson Land, New World Development, Wheelock and Company, and Empire Group Holdings a week earlier.
To the relief of property developers, and perhaps to the dismay of prospective home buyers, the site sold for 6.9 percent more per square metre than the adjacent plot had sold for the previous week, however analysts still predict a slide of 15 percent or more in home prices in the city over the coming year.
Better Views Bring Higher Bids
Goldin’s winning bid entitles the company to build up to 53,394 square metres of new homes on Kai Tak Area 4B Site 4. The purchase is equivalent to HK$15,497 per square foot of built area, or about 6.9 percent more per unit area than the adjacent land parcel sold for last week.
Both of the Kai Tak sites sold this month are on the Kwun Tong side of the former airport runway, facing Kowloon East rather than Victoria Harbour. While the twin plots on the north side of the Kai Tak runway are adjacent to each other, the second site has better sea views, according to Thomas Lam, head of valuation and advisory services at Knight Frank in Hong Kong.
With earlier predictions of the site’s selling price ranging from HK$8.33 billion to HK$9.2 billion, the final transaction price for this latest plot is within the expected range and comes close to the high end of expectations, after last week’s sale came in below many projections.
Goldin Financial plans to invest a total of HK$14 billion in the project, a company spokesman said following the tender. The company representative said that it believed the HK$8.9 billion price tag was “reasonable” since the site enjoys superior views and a more favourable location compared to the site offered last week, which Goldin also bid for.
Confidence Restored But Downturn Still Expected
While Goldin’s price of HK$15,497 per square foot of homes comes in above the HK$14,502 per square foot that the Henderson consortium agreed to last week, the rate is still nearly 13 percent below the HK$17,776 per square foot that Sun Hung Kai Properties paid for another Kai Tak site in May of this year, with analysts linking this to expectations of a market slide.
“We expect housing prices to fall 15 percent in 2019 and land prices will inevitably follow the same downward trend as developers re-evaluate market risks,” Denis Ma, head of Hong Kong research for JLL told Mingtiandi today, cautioning that the Kai Tak tender does not indicate a rebound in the city’s real estate market just yet.
In a statement released earlier this week, the property consultancy attributed the current downturn in home prices, and corresponding caution among developers, to the impact of “The simmering trade war and China’s ongoing efforts to deleverage the economy” on business confidence as well as to the 20 percent dive in the Hang Seng Index, which tracks Hong Kong’s stock exchange, since January of this year.
Goldin Group Wins Second Round on Kai Tak
The tender competition for this latest Kai Tak site featured the same players as last week, with Goldin’s winning proposal shouldering aside competing bids from CK Asset, China Overseas Land & Investment, K&K Property, Sun Hung Kai Properties, and a fresh consortium bid from Henderson Land, New World Development, Wheelock Properties, and Empire, which emerged victorious from last week’s tender.
A second joint bid for the site, from K Wah International and Sino Land, also missed out on the residential project.
Goldin Group, which was founded by Hong Kong-based tycoon Pan Sutong, is expected to add the Kai Tak site to its existing portfolio of three Hong Kong real estate projects.
In addition to this latest prize, the company’s website lists the 27-storey Goldin Financial Global Centre in Kowloon Bay, a residential project on Sheung Shing Street in Ho Man Tin, and the development rights of Ho Man Tin MTR station plot one, which Goldin obtained in late 2016, as among the group’s property assets in the city.
Pan, who was born in mainland China but settled in Hong Kong after living in the US, is currently ranked as the 14th richest man in Hong Kong with an estimated $5.7 billion in assets, according to Forbes.