Wang On Acquires $33M Kowloon Site for APG Residential JV

Wang On Properties is continuing to bet on the Hong Kong housing market, having last month acquired the Cheng Fung Mansion in Kowloon in an auction which valued the ageing building at HK$257 million ($32.9 million), according to a press release from property services firm Savills.

The acquisition of 31-41 Fei Fung Street came less than four months after the property developer announced its entrance into a joint venture with a fund managed by the Netherlands’ APG Asset Management, with the parties agreeing to invest up to HK$4.6 billion acquiring Hong Kong residential properties.

“We are delighted to partner with Wang On to execute our fourth residential project,” said Dick Kors, spokesperson at APG. “It (not only delivers) new housing supply to the market, but also represents an asset revitalization strategy bringing vitality to the urban residential neighbourhood.”

Acquired under a compulsory sale for redevelopment which valued the project in the Wong Tai Sin neighbourhood at HK$7,811 per square foot of potential floor area, the transaction sets Wang On up to redevelop the plot together with an adjoining site on 45 Fei Fung Street and 110 Shatin Pass Road into a 93,700 square foot (8,705 square metre) residential community.

Growing in Kowloon

Wang On’s acquisition, which has been earmarked as the fourth seed project under its joint venture with APG, came during the same week that the Hong Kong government announced plans to raise the amount of mortgages available in housing loans, which is expected to incentivise first-time buyers to purchase larger homes.

This easing measure came after the number of new homes sold in Hong Kong fell 55.4 percent in February from the preceding month to a total of 479 units, according to research from Centaline property agency, as the current COVID-19 outbreak squelches the market.

Through its acquisition of the Cheng Fung Mansion, which occupies a 3,900 square foot site, Wang On is taking the final step towards consolidating the two adjoining plots along Fei Fung Street for redevelopment as a single site.

“Upon completion, the project would be in the HK$1.9 billion region,” Alex Leung, senior director at local ​​surveying firm CHFT Advisory and Appraisal Limited said in estimating the development’s eventual value. Once completed, the project is expected to provide 250 residential units, which according to Singtao Daily would become part of Wang On’s existing boutique residential brand series, The Met.

Units at the project are expected to cost between HK$22,000 and HK$25,000 per square foot of floor area, according to Vincent Cheung, managing director at property consultancy Vincorn.

Currently occupying the plot is a 1971-vintage building with ground level retail topped by residential space. Holding about a 91 percent ownership in the property at the time, the developer had in 2020 submitted an application for a compulsory sale of the Cheng Fung mansion, which was said to have been approved in January before the auction took place late last month.

Although the developer has not disclosed a completion date for this fourth project in its joint venture with APG, three developments in the series are scheduled to be finished in 2024 and 2025, according to Wang On’s 2021 1H report. The second project, located on Ming Fung Street, is expected to begin sales by the fourth quarter of this year, according to a report from the Hong Kong Economic Times at the time that Wang On acquired the site.

Help For Homebuyers

The Wong Tai Sin pick-up comes as housing transactions hit a new low last month as Hong Kong grapples with the coronavirus and the “Covid Zero” approach to public health.

“We expect home sales in Hong Kong to severely slow down in the current quarter compared to the same period last year, due to social distancing measures imposed by the government, and also to the upcoming US interest rate hike, which is to be realised by the market in the coming months,” said CHFT’s Leung.

Wang On’s latest acquisition came amid low residential supply in Kowloon, and a relaxation of financing for home buyers in Hong Kong. New developments available in Kowloon’s Wong Tai Sin area remain limited, which means there will be strong demand for quality new homes in the area, said Hannah Jeong, head of valuation and advisory services at Colliers Hong Kong.

In terms of residential land supply, there are only two Kowloon sites among the 13 projects slated for sale under Hong Kong’s 2022-23 Land Sale Programme, which is dominated by plots on Hong Kong Island and in the New Territories, said Jeong.

Available mortgages on homes with a loan-to-value ratio of 80 percent are set to increase to a maximum of HK$12 million from HK$10 million, according to Hong Kong financial secretary Paul Chan in his announcement of the city’s 2022-23 fiscal budget two weeks ago. First-time home buyers who qualify for a loan-to-value ratio of 90 percent may be eligible for as much as HK$10 million in mortgage financing – up from the previous HK$8 million.

Despite these easing measures, however, Jeong noted that the latest wave of Covid-19 had slowed the city’s economic recovery. In February, total transactions for residential, commercial, industrial and parking spaces slid to a 25-month low at 3,992 deals, according to Centaline.