Poly Property Wins Kowloon Residential Project for HK$3.3B

The Hong Kong Lands Department on Wednesday announced that a subsidiary of China Poly Property, has won a tender for a 3,689-square-metre (39,708 square feet) residential site in Yau Tong, in the southeastern end of Kowloon.

Poly Property, China’s fourth largest real estate developer in terms of sales in 2017, purchased the site for HK$3.3 billion (US$420.42 million), winning with it the right to build around 480 units of housing. The project is approved for construction of some 297,100 square feet (27,601 square metres) of homes, which works out a unit price of HK$9257 per square foot.

The latest land acquisition marks state-owned China Poly Group’s third residential project in Hong Kong, after the Hong Kong-listed company bought a Kai Tak project in 2014 and later purchased a luxury residential plot in Tuen Mun in 2015.

Poly Makes Top Offer for a Challenging Site

At HK$9257 per square foot, Poly’s new prize marks the lowest unit price in nearly two years for urban land in Kowloon, and the transaction price of HK$3.3 billion is close to the lower end of market forecasts of between HK$3.2 billion to HK$4.6 billion for the site.

However, market analysts indicated that the plot’s hillside location and limited transport connectivity meant that the unusually low unit price was not necessarily an indicator of pessimism in the market. “It is situated in a neighborhood concentrated with public and subsidized housing, at a distance from the MTR station and has no direct link to it,” Cushman & Wakefield senior director KB Wong told Mingtiandi. The consultancy’s head of valuations for Hong Kong also noted that, “View from the site is not particularly attractive.”

To win the Kowloon site, Poly bested a field of nine primarily local competitors including Hong Kong heavyweight developers Sun Hung Kai Properties, CK Asset Holdings, New World Development, Henderson Land Development, K Wah International and Wheelock Properties. A consortium of Sino Land, China Overseas Land & Investment and Billion Development and Project Management also made an offer for the project, and there were further bids from Jantix Group Holdings and K&K Property Holdings Limited.

Finished Homes Could Sell for HK$20,000 Per Square Metre

Based on the land price premium Poly Property paid, and the requirements for development of the site, C&W’s Wong estimates that the sale price of completed homes in the project would be above HK$20,000 per square foot, which is consistent with prevailing prices for new projects in comparable locations.

Thomas Lam, senior director at UK-based property consultancy Knight Frank, also found the bid to be in line with the current market. “My estimation of accommodation value was between HK$9,000 and $10,000 per square feet,” Lam told Mingtiandi, adding that, “The result is in line with my estimation,”

Poly Expands Hong Kong Presence

Poly’s latest purchase comes over four years after Poly Property Group, the Hong Kong-listed arm of state-owned China Poly Group, entered the Hong Kong market when it paid HK$3.92 billion for a site in Kai Tak which it later developed into the luxury project Vibe Centro.

In 2015, the developer made its second move in the city by purchasing a site in Tuen Mun for HK$3.5 billion, at a unit price of HK$15,095 per square foot. That acquisition marked the highest land price paid in the western New Territories that year.

Now, more than one year after Poly Property launched sales for its luxury Vibe Centro apartments in Kai Tak in April 2017, the company has recouped its cash and is ready for reinvestment.

Mainland Developer Undeterred by Shifting Market

As more than a dozen Hong Kong banks began what could be a series of mortgage rate increases this month, some analysts have anticipated a downturn in the market, and the city’s largest developer, Sun Hung Kai already began offering discounts on some housing projects in the city.

However, Poly’s bid may show that the group is still confident in the outlook for Hong Kong housing. “It was won by Poly Group is a good sign showing mainland developers are still keen and confident on the local property market,” C&W’s Wong noted.

Among the other bidders for the Yau Tong site, the mainland’s seventh largest developer by sales, China Overseas Land & Investment, also gave the market a thumbs-up via its participation in the consortium bid with Sino Land and Billion Development and Project Management.