Sun Hung Kai $77M Residential Buy Marks Cheapest Hong Kong Land Sale in 11 Years

Sun Hung Kai Properties has won a site near Hong Kong’s international airport at the lowest price in more than a decade, after the Hong Kong government conducted a second tender of the residential plot.

Hong Kong’s largest builder by market value’s bid of HK$602 million ($77 million) for Town Lot 55 in the Tung Chung area gives it the right to develop up to 37,268 square metres (401,149 square feet) of space, according to an announcement by the city’s Lands Department.

At HK$1,501 per square foot of built area, the deal is the lowest price per unit area of any government land sale in the last 11 years, according to a report by local news site HK01, with analysts saying the tender was in line with earlier predictions.

“The awarded price of HK$602 million falls within the middle of market expectations, which had a wide range due to the sensitivity of the site’s unit rate to developers’ individual assessment parameters,” Alex Leung, chief surveyor at CHFT Advisory and Appraisal, told Mingtiandi. CHFT had expected a price between HK$500 million and HK$530 million.

Second Time Lucky

Sun Hung Kai, which bested competing bids from local rivals K Wah International, Sino Land and a private entity named Able Best Limited, is now in line to develop 745 homes on the site on Lantau Island.

The developer controlled by Hong Kong’s Kwok family plans to invest HK$3.5 billion, including the land premium, building small and medium-sized homes on the site, Sun Hung Kai deputy managing director Victor Lui told local media.

“Our previous valuation of this site on accommodation value basis ranged from HK$1,250 to HK$1,400 per square foot. The transacted consideration is in line with the market expectation,” Vincent Cheung, managing director of Vincorn Consulting and Appraisal Limited, told Mingtiandi.

“The government clarified before the tender closing that the site can be built up to 745 units instead of 330 units (in the earlier tender), which attracts developers’ interest on this site,” Cheung added.

The government’s initial tender in 2023 estimated the site could yield 415 homes, however, a sanitation report indicated that it could only support 310 units, triggering concern among potential developers. The government cancelled that tender after all four bids failed to meet its reserve price.

With the government having increased the expected number of homes for Town Lot 55 based on improved sewage discharge infrastructure, the economics of this latest tender became more appealing. The project also benefits from the expected opening of the Tung Chung East MTR station, which is scheduled to open in 2029 and the success of other recent tenders in the area.

“After the increase in units number to 745, the average unit size could be around 538 square feet on gross. The flat size mix could be in a wider range, and better fit different needs of potential flat buyers,” said CHFT’s Leung.

“The site upon completion will benefit from the opening of the Tung Chung East MTR station. In addition, the Tung Chung Town Lot 53 successfully bid by Nan Fung last year together with the upcoming Site 106A will make the community more complete in the future,” Vincorn’s Cheung said.

Cautious Acquisitions

Hong Kong’s feeble housing market has made developers wary of acquiring new sites, with previous land sales in Tung Chung, an emerging area around one-hour’s commute from Central, requiring repeat attempts before finding a buyer.

“The fact that this site was sold on its second attempt mirrors a recent phenomenon in Tung Chung. This is indeed the fourth consecutive project in the area that had to be awarded on its second tender attempt. This indicates that the government and MTRC have revised its perspective on the market situation, and could have well adjusted their reserve price and/or tender conditions in favour of the developers,” said CHFT’s Leung.

Last December, Hong Kong’s MTR Corporation sold a plot near Sun Hung Kai’s latest acquisition to local builder Nan Fung Group after receiving no bids in a previous tender in 2023. That sale went through after the rail operator cut the project’s scale by over 53 percent and eliminated the shopping centre element of the tender.

Sun Hung Kai’s pick-up this week comes as the company has been one of Hong Kong’s most acquisitive developers in recent months, including winning a residential site tender in the New Territories’ Sha Tin area during January with a HK$606 million bid.

In July last year, the developer outbid ten contenders to win another residential site in Sha Tin for HK$619 million, with that figure representing a more than 50 percent discount from 2022 land prices in the area, highlighting the city’s housing market slide.