Lu Hua, Chairman of Shenzhen Investment
The Shenzhen government’s largest listed real estate firm has made its first foray across the border, buying a residential site in the New Territories for HK$3.17 billion (US$406.2 million) in a joint venture with affiliated Hong Kong firm, Road King Infrastructure.
The Hong Kong Lands Department awarded the tender for a 12,205 square metre (131,374 square foot) site in Tuen Mun Town to the Shenzhen Investment-led joint venture the city’s government announced this week.
The Shenzhen-led team beat out nine other bidders for the 50-year land grant parcel, paying HK$6,700 (US$859) per square foot – significantly higher than the market expectation of up to HK$2.8 billion for the site, which would have worked out to HK$6,000 per square foot.
Mainlanders Buying Up Hong Kong Housing Industry
The purchase by Shenzhen Investment and Road King continues at trend toward domination of Hong Kong’s housing industry by mainland players. So far during 2017, of the five residential sites auctioned in the city for over HK$40 billion, all have been purchased by mainland firms.
The rivals for the Tuen Mun site were primarily Hong Kong builders, including Cheung Kong Property Holdings, Henderson Land, Wheelock Holdings and Sun Hung Kai Properties, but Shenzhen-based developer Vanke also submitted a bid (via a Hong Kong subsidiary), as did Shanghai’s Shimao Property in a joint venture with local player Sino Land.
The winning partners will jointly develop the site, which is zoned for construction of up to 43,938 square metres (473,000 square feet) of space, according to a stock exchange filing by Shenzhen Investment. “The Board believes that the property market in Hong Kong has a long-term development potential,” providing the Shenzhen firm with a “good foundation” for investing in the Hong Kong property market, according to the statement.
Road King Part of the Greater Pearl Delta Convergence
For Road King, this is the second time this year that the infrastructure specialist has teamed up with a mainland giant to buy a Hong Kong site, after the company teamed with Ping An Real Estate to buy a prized residential plot in the Wong Chuk Hang area of southern Hong Kong in February.
While Road King is Hong Kong-registered, Shenzhen Investment holds a 27.38 percent stake in the firm. Road King chairman Lu Hua is a former chairman of Shenzhen-based developer Shenzhen Shahe Industry and former general manager of Shenzhen Property Development Company, as well as having served as a non-executive director of Shenzhen-based Ping An Insurance. The company’s board is dominated by former and current Shenzhen officials.
Developers Are Still Betting on Hong Kong Housing
The winning bid suggests that many developers have a sunny outlook on the residential market in the area, despite widespread fears that Hong Kong may be approaching the peak of a massive housing bubble. The site is located at Area 56 Kwun Chui Road in Tuen Mun Town, in the west of the city’s New Territories.
Education may partly explain the intense interest in the site, which is just a five-minute drive to Harrow International School, a British boarding school that opened in 2012. “Better schools, lower rents and improved transport links continue to lure expats to less traditional locations in the New Territories,” global property consultancy Savills noted in a market report last month, pointing out that the opening of new international schools in the area is proving to be a draw for some residents of the city.
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