Tuen Mun will have to wait a bit longer for its next housing project
The Hong Kong government withdrew the tender for a residential development site in the New Territories this week after no bid met the reserve price, marking the sixth cancellation out of more than 70 tender exercises for government land sales in the past five financial years.
Known as Tuen Mun Town Lot 561, the parcel measures 362,884 square feet (33,713 square metres) and can be developed for residential purposes with a maximum gross floor area of 1,306,381 square feet.
The tender for the site closed on 22 April and drew failed bids from Henderson Land, K Wah, Sino Land, Sun Hung Kai and CK Asset, the government said Tuesday in a release. The tender was notable for being the first sale site to carry the minimum flat size requirement of 26 square metres (280 square feet) introduced by the government last December.
“Notwithstanding the cancellation of this tender, the government will continue to apply the minimum flat size requirement to government land sale sites, railway property development projects and projects of the Urban Renewal Authority, as well as lease modification/land exchange applications for private residential development projects, with the aim of enhancing living space and responding to the aspirations of society,” a spokesman for the Development Bureau said in the release.
Developers Less Enthused
A traditionally industrial district in the western New Territories, Tuen Mun is expected to benefit from improved transport connectivity, including a $6.1 billion tunnel project connecting the area to Hong Kong’s international airport.
Cyrus Fong of Knight Frank
Cyrus Fong, senior director for valuation and advisory at Knight Frank, said the low number of bidders in the latest tender could be due to a supply-demand mismatch in the vicinity.
“The scale of this Tuen Mun site is considered large,” Fong told Mingtiandi. “Looking at nearby areas, there is already an adequate amount of residential supply.”
Noting that the previous five cancelled tenders included four commercial sites, he said residential sites tend to be preferred by builders for future development and investment.
“Looking forward, there are still a number of residential sites available for sale in various scales,” Fong said. “Developers may be conservative at the start of the financial year. However, the overall outlook for the residential market is still optimistic.”
Alkan Au, senior director of valuation at JLL, said the market expectations for the Tuen Mun site fell within a range of HK$7.2 billion to HK$9 billion ($920 million to $1.15 billion), or HK$5,500 to HK$6,900 per square foot of potential built area.
“A neighbouring site, TMTL 523, was awarded to Wing Tai Properties at HK$3,343 per square foot in June 2016, and the last site sold in Tuen Mun, TMTL 518, was awarded to Kaisa Group at HK$6,005 per square foot in January 2020,” Au said.
A Question of Timing
Vincent Cheung, managing director of real estate advisory firm Vincom Consulting, put the tender’s failure down to the large lump sum required for a site in an area that remains lacking in infrastructure support and mass transit.
“In addition, developers are busy selling piled-up stock at their projects after a relaxation of social distancing restrictions, which began on 21 April, following low sales recorded in the first quarter of 2022,” Cheung said.
Alex Leung, senior director at local surveying firm CHFT Advisory and Appraisal, expects the site to be re-tendered as residential land again, though he suggested that the government offer some of its nearby land measuring more than 1 million square feet of potential gross floor area as a trial balloon.
“The government should launch that land first and see if the poor response is due to the high supply in the area or more on the site characteristics of TMTL 561,” Leung said.
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