The first government tender of a residential project in Hong Kong’s Wan Chai area in eight years closed on Friday with a flock of developers entering bids for the chance to develop housing worth nearly HK$3 billion ($382 million) on the site at 269 Queen’s Road East.
“The government received 21 tender submissions on Friday,” said Vincent Cheung, managing director at Vincorn Consulting and Appraisal. “The number of bids reflected high demand for residential sites in Hong Kong Island in this year’s government land sale programme,” he added.
The residential plot known as Inland Lot No. 9061 spans 13,207 square feet (1,227 square metres) and can yield up to 116,229 square feet of new homes, according to a government announcement last month, with the site being one of just four residential projects on Hong Kong island to be included in the government land sale programme this year.
The Wan Chai site’s small size provides a rare opportunity for small to medium-sized developers to expand their footprint in the area, said Colliers in its land sale programme update published last month, with the firm’s head of valuation and advisory services for Hong Kong, Hannah Jeong predicting bids in the range of HK$1.39 billion to HK$2.2 billion for the project, as the city’s housing market shows signs of revival.
More Homes for HK Island
Jeong’s estimate for the bidding translates to an accomodation value of HK$12,000 to HK$18,900 per square foot for the project just over a kilometre (0.62 miles) west of the Happy Valley Racecourse, with the sale taking place as analysts predict a rebound in Hong Kong’s housing market from a challenging first quarter.
Cushman & Wakefield expects 14,900 homes to change hands during the three months ending 30 June, which would represent an increase of 48 percent from the first quarter. Compared to the same period in 2021, however, that transaction volume would still represent a drop of 32 percent, said the property firm.
Given the high pedestrian flow along Queen’s Road East, the buyer will likely build the residential flats atop a retail podium – similar to the single-block composite developments nearby, such as One Wanchai on 1 Wan Chai Road, and Queen’s Cube on 239 Queen’s Road East, said Colliers.
The site on Queen’s Road East, which is about a 10 minutes’ walk from the Wan Chai MTR station, could yield more than 200 residential units upon completion with each flat averaging 400 square feet, said Jeong.
The plot is one of just two Hong Kong island residential projects being offered by the government during the first half of this year, with a tender for a site on Hospital Road in the Mid-Levels West set to begin on 24 June.
Wan Chai Decline
Jeong predicts that flats in the project are likely to sell for around HK$28,000 per square foot, while Vincorn’s Cheung expects a range from HK$33,000 to HK$35,000 per square foot.
Homes at Swire Properties’ Eight Star Street, which is less than a kilometre from the Queen’s Road East plot, have been selling for from HK$33,171 to HK$53,122 per square foot, according to transaction records posted by Centaline Property Agency.
As of 8 March 2022, the developer had managed to pre-sell 28 out of 37 units, according to its latest annual report.
The latest government land sale is taking place despite selling prices for apartments in Wan Chai having dropped 2 percent in the first three months of 2022 compared to the same period last year, according to Alex Leung, senior director at CHFT Advisory and Appraisal.
This quarter, selling prices for homes in the district remained flat, though rents have declined by about 10 percent year-on-year due to more housing supply having been completed and made available for lease, said Colliers’ Jeong.
Across Hong Kong, home buyers are expected to face significant challenges this year, including rising interest rates and uncertain economic recovery, said Keith Chan, director and head of research at Cushman & Wakefield in the firm’s latest residential report.
Based on these potential headwinds, the property firm expects the number of residential transactions in 2022 to decline by 20 to 25 percent compared to last year, while home prices would grow by no more than 3 percent over the period, Chan added.