Hong Kong’s MTR Corporation failed to receive a bid by the close of a tender for a residential and retail project near Hong Kong’s International Airport this past week, marking the city’s second failed land sale this month.
Despite receiving 32 expressions of interest since the tender process initiated on 11 October, the tender for the site about six kilometres (3.7 miles) from Hong Kong International Airport concluded on Thursday with no commitments for Package One of the Tung Chung East Station Development project, according to a statement from the company.
The aborted tender for the project opposite the future Tung Chung East Station on Lantau Island marks the first time in over a decade that a project by the listed developer and operator of the city’s mass transit system has failed to attract any bids, according to local media. MTR’s last project to not receive a bid was a development at Tin Wing Station in Tin Shui Wai in February 2013.
“The lack of tenders received for the land indicates that the base price set by MTRC is considered not attractive in itself,” said Alex Leung, Chief Surveyor at consultancy CHFT Advisory and Appraisal. “Furthermore, this result implies that developers are not interested in projects that have a long return period. It is expected that there will be a significant amount of residential land supply in Tung Chung, and therefore the appreciation potential of these projects appears to be poor.”
The project is located in the same area where the Hong Kong government shuttered the sale of a residential site on 1 November when the four bids submitted failed to meet the government’s reserve price.
Package One of the MTR project includes Tung Chung Town Lot No 53 which is situated at the southeastern part of the larger project site, opposite the future Tung Chung East Station on the Tung Chung Line Extension, both of which are targeted for completion in 2029.
Package One in the MTR Tung Chung East project includes up to 64,650 square metres of residential and 8,133 square metres of retail area with the larger MTR development spanning a combined 626,600 square metres across a series of phases.
The development will connect directly to the future Tung Chung East Station by footbridges. Upon completion of the station and line extension, residents will be able to reach Central, West Kowloon or other urban districts within approximately 30 minutes.
The project is estimated to be worth between HK$1.6 billion and HK$2.8 billion and is expected to have 1,000 flats and a shopping mall, according to local media. “The market generally considered the value of this land to be in the range of HK$1,900 to HK$3,000 per square foot on an accommodation value basis,” said Leung.
Prices for mass market homes fell 1.1 percent in Hong Kong during September compared to a month earlier, according to JLL, with several months of market decline having brought values back to December 2022 levels.
The housing slide has seen the scrapping of several tenders this year as developers’ appetite for new projects remains suppressed amid weak market sentiment.
Rising interest rates have dampened property prices and demand in the Asian financial centre, as local banks track the US Federal Reserve’s interest rate hikes in raising their prime borrowing rates to a range of 5.875 to 6.375 percent, the highest since 2007.
“If interest rates remain high in 2024, further drop in residential prices will be not avoidable. We are expecting another 5 to 10 percent adjustment, subject to macroeconomic performance,” said Hannah Jeong, head of valuation and advisory at consultancy Colliers. “In September, 958 primary and 2,088 secondary residential transactions were recorded. Secondary market transactions have fallen below 2,000 only four times since 1997, which has shaken developers’ confidence.”
Following four previously unsuccessful attempts, the Hong Kong government on 1 November rejected all four bids for a 10,648 square metre residential site in Tung Chung, remarking that “the government will not sell a site if no bid reaches the reserve price as assessed by the government’s professional valuers.”
In February, MTR withdrew a tender for its Oyster Bay project in northern Lantau island after the three bids received for the commercial and residential site fell short of the company’s expectations. During that same month, Hong Kong’s Urban Renewal Authority cancelled a Kwun Tong project tender after receiving just one bid for the 25,595 square metre site.
In January, a tender for Hong Kong’s first residential plot of 2023 was withdrawn as offers from four bidders for a luxury site in Stanley failed to reach the government’s expectations.