Kowloon Redevelopment Project Sells for $41.2M as Hong Kong Housing Sizzles

Hong Kong’s Grand Ming Group has acquired a housing project in To Kwa Wan for HK$320 million ($41.2 million) as the impending completion of a new route on the city’s MTR system spurs developer interest in the Kowloon neighbourhood.

As the local residential market continues to heat up, the Hong Kong-listed construction company added the project on 41-45 Pau Chung Street to its list of acquisitions after purchasing a number of sites in the past year, most recently in Tsim Sha Tsui and Fanling. In To Kwa Wan, which is located between Hung Hom and Kowloon City, Grand Ming expects to develop a mid-scale residential building with retail shops on the ground floor.

“With the enhancement of MTR infrastructure, To Kwa Wan will be a new district like [Olympic station] vitalizing Tai Kok Tsui,” said Peter Yuen, managing director and head of investment and sales at Savills. Noting that developer Henderson Land and the city’s URA have a number of projects in the neighbourhood, he added that, “To Kwa Wan will reveal a new face in 5 years time.”

With the launch of the Shatin to Central MTR link, the property will also benefit from better connectivity between areas such as New Territories, Kowloon and Hong Kong Island, Yuen said.

New Hotspot in Kowloon

Grand Ming purchased the To Kwa Wan project, which can yield a gross floor area of 31,330 square feet (2,911 square metres) of housing from rival developer ITC Properties for the equivalent of HK$10,214 ($1,314) per square foot. Hong Kong-listed ITC had announced recently that it had begun construction of the superstructure of a new project on the site in July, after originally buying 80 percent of the properties occupying the plot in 2012.

“This latest acquisition presents a rare opportunity for a residential site already primed for development in To Kwa Wan,” said Savills’ Yuen.

With the extension of the Tuen Ma MTR line, To Kwa Wan district is becoming a popular area for redevelopment, with developers such as Henderson Land buying five neighbouring sites in the area. The district is also home to 11 projects being redeveloped by the city’s Urban Renewal Authority, which in 2011 had established a project to rehabilitate the buildings on the Pau Chung plot.

A completed section of the Tuen Ma line, part of the long-overdue Shatin to Central link, which stretches nearly 13 kilometres (8 miles) to connect Tai Wai in the New Territories to Hung Hom in Kowloon, was opened for service in June after a 2-year delay.

The new line connects To Kwa Wan station and Grand Ming’s new site to Shatin in the New Territories and nearby Hung Hom.

The remaining section of the MTR project was scheduled for completion in the first quarter of 2022, after repeated delays. With another postponement announced in August, the completion of Hong Kong’s most expensive rail project remains unknown, reported the South China Morning Post.

The project on 41-45 Pau Chung street was put up for sale in July last year and purchased by Grand Ming last week, according to Savills. The property occupies a site area of 3,500 square feet, with foundation work having been completed by ITC Properties Group.

In 2011, an 80 percent ownership of the property was put up for tender and acquired by ITC Properties Group for HK$70 million in the following year. In 2015, having secured 93.3 percent ownership of the property, the company then applied for a compulsory sale for redevelopment, according to the Hong Kong Economic Times.

Just under two years later, in an annual report documenting the year that ended 31 March 2017, ITC announced the acquisition of the last shop unit on the ground floor of 41-45 Pau Chung Street, giving the company full ownership of the site. The group also mentioned that demolition of the property was in progress at the time the report was published.

Unlike other properties purchased by Grand Ming, the To Kwa Wan project is under a non-consent scheme, meaning it is not located on land granted by the government for development purposes, and can be put up for presale by the first or second quarter of 2022, Yuen added.

Competition for Land

Driven by Hong Kong’s quickening housing market, with residential capital values rising 0.6 percent in July after a 0.6 percent increase in the previous month, developers such as Grand Ming are rushing to stock up on land supply.

Within the same week as Grand Ming’s purchase of the 41-45 Pau Chung site, 541 out of 588 available apartments at three projects were sold in what was Hong Kong’s largest weekend of property sales in nearly a year, reported the South China Morning Post.

The group’s recent acquisition also comes just three months after its agreement to buy the Railway Building in Tsim Sha Tsui, previously owned by the family of late “Shop King” Tang Shing-Bor, for HK$206.8 million.

In January, the company replenished its land bank with the acquisition of the Luen Fat Street project in Fanling at a consideration of HK$140 million.

Even amid a dormant real estate investment market in December last year, a 16-storey building in To Kwa Wan district had attracted developer Hong Kong Resorts International (HKRI), which agreed to buy the United Daily News Centre for HK$310 million.

With the full Tuen Ma line running about 56 kilometres across 27 stations, including To Kwa Wan station, Savills’ Yuen expects a revitalisation of the district to take place throughout the next five years.