Kerry Properties won a residential site in Hong Kong’s New Territories for HK$1.44 billion ($180 million) to record the city’s first successful government land sale this year.
The HKEX-listed developer, through its subsidiary Wealthy Guide Ltd, has been awarded the tender for an 89,986 square foot (8,360 square metre) residential plot along Po Fung Road in Tsuen Wan district, the Lands Department announced late Wednesday.
The successful tender breaks a string of three failed land sales over the past five weeks when sellers cancelled bidding exercises in the face of disappointing developer offers, including the MTR Corp withdrawing a tender for the first phase of its Oyster Bay project in northern Lantau island on Monday.
Hotter Than Expected
The developer controlled by Malaysian billionaire Robert Kuok is paying roughly HK$4,578 per square foot of buildable area for Tsuen Wan Town Lot No. 427, which sits right next to Castle Peak Road in Ting Kau. The project, which is expected to yield around 490 homes, is also within a five-minute drive from the Tsuen Wan West and Tsuen Wan MTR stations.
“The residential site at Po Fung Road, Tsuen Wan is considered an optimal scale that could appeal to medium to big scale developers,” Alex Leung, senior director at CHFT Advisory, said in response to Mingtiandi inquiries on Thursday.
Kerry’s winning bid was at the high end of recent market expectations, or just 4 percent below the highest analyst projection. According to Leung, general market expectations before the bidding closed on 10 February was that the site would sell for anywhere between HK$1.1 billion to HK$1.5 billion.
He said that analysts had already revised their forecasts for the tender downwards as Hong Kong’s market has continued to struggle.
“Surveyors in private consultant firms lowered our expectations when we noted some land parcels were sold at low prices by the end of 2022, and some land sales were withdrawn,” he added.
The tender exercise was dominated by local companies with home-grown builders Sino Land, Far East Consortium, Wheelock Properties, K Wah International, Great Eagle and Grand Ming Group also making bids. Singapore-listed property firm Hong Fok Corp was the sole participant from the city-state.
As a condition of the tender, Kerry Properties is also required to build a 30-place home for mentally handicapped persons on the site.
The Tsuen Wan site gained more attention from developers compared to the three earlier land sales which all failed due in part to their challenging scale during the current environment.
Vincent Cheung, managing director at Vincorn Consulting and Appraisal, said developers have set their eyes on modest-sized projects that can deliver returns quickly, as their inventories of unsold units are still piling up from last year, when the total volume of new homes sold hit a nine-year low.
“Developments with small scale, less investment sum and good location will attract the developers,” Cheung said.
CHFT’s Leung estimates that, the MTR’s Oyster Bay site, which failed to sell earlier this week, is would require a total investment of HK$9.5 billion, while the sole bid for a Kwun Tong commercial site spanning 275,500 square feet was also rejected earlier this month.
That failed sale came after the Lands Department last month rejected bids by CK Asset, Sun Hung Kai, K Wah International and a consortium of Sino Land and Great Eagle for a luxury residential site in Stanley, with Leung estimating the land premium for that site at around HK$9.6 billion.
“Luxury residential units take longer to sell the units at good prices even if the market sentiment could be back to pre-COVID situations,” he explained.