Wheelock and Company has won a discounted residential site in Hong Kong’s New Territories amid a plunge in property prices in the Asian financial hub, according to an announcement by the city’s MTR Corporation, which organised the project tender.
The government-backed railway operator awarded phase 12 of the Lohas Park development in Tseung Kwan O to the Hong Kong developer after setting a land premium of HK$2.725 billion for the project– a nearly 12 percent discount from the premium paid on the housing estate’s previous phase when it was awarded ten months ago.
With Wheelock agreeing to pay an undisclosed lump-sum on top of the land premium under a profit-sharing partnership with the MTR, the developer is estimated to be promising a total of between HK$5.3 billion and HK$6.2 billion to the government transport monopoly, according to Knight Frank’s head of Hong Kong valuation & advisory, Thomas Lam.
The successful bid comes six months after a joint venture invested by Wheelock, K Wah International Holdings and China Overseas Land and Investment won a tender for the biggest plot of residential land on what was once the runway of Hong Kong’s Kai Tak airport for HK$12.74 billion.
Winning a Plot Above the MTR
Despite growing uncertainty in Hong Kong’s housing market, Wheelock shouldered off eight competing bids for the project from developers including CK Asset Holdings and Henderson Land Development.
“It has been difficult to buy land in recent years, but developers still need to increase their land banks,” Lam said, adding that there is a limited supply of large residential sites like Lohas Park which are directly connected to MTR stations.
Based on the maximum gross floor area of 89,290 square metres (961,110 square feet), Wheelock is set to pay between HK$5,500 to HK$6,500 per square foot of housing in the project, based on Knight Frank’s estimation.
Other bids for the site, which is estimated to yield up to 2,000 homes, came from Sun Hung Kai Properties, China Overseas Land & Investment, Chinachem Group and Sino Land, while New World Development and Empire Group submitted a joint bid.
Remaining Bullish on the Region
Wheelock’s vice-chairman, Stewart Leung, said that the company’s bid had allowed for the impact of the virus scare, according to the South China Morning Post. Knight Frank estimates that homes in the project will sell for up to HK$16,000 per square foot.
“While the site is attractive with developed infrastructure, developers are more cautious with selling prices due to worries that the coronavirus outbreak could further weaken the economy,” Lam noted.
The site above the planned Lohas Park mall is Wheelock’s fourth within what will be Hong Kong’s largest residential estate with 58,000 people expected to live in the development’s 21,500 homes once it is completed in 2025.
The developer said in a statement that it had maintained bullish outlook on the region, despite a downturn in the property market that has seen home prices slump to record levels.
Site Sells as Home Prices Slide
Wheelock’s confidence comes after average prices for new flats in Hong Kong continued to slide as anti-government prices jarred homebuyer confidence, according to local property agency Ricacorp Properties as cited by The South China Morning Post.
The property agency said that during the third quarter of last year the average price of new flats in the city had dropped 25 percent from its all-time high in 2018 to slide to HK$10.87 million per home.
The downturn rubbed off on Wheelock’s sales of its existing developments at Lohas Park, with buyers passing on 80 percent of the homes made available at launch day of the latest tranche of condos at the developer’s Grand Marini project last October.
During the six months ended 30 June 2019, Wheelock’s contracted residential sales amounted to HK$16.2 billion, down from the HK$23.4 billion in the first half of 2018, while the company’s full year results are yet to be released.
Predicting Worse to Come
With concerns over the coronavirus and ongoing political instability leading local property agents to warn of a possible 80 percent slump in home sales this month, the discounted tender of the latest site at Lohas Park illustrates the reversal of Hong Kong’s property market over the past year.
In April 2019 a neighbouring site at the Tseung Kwan O development had attracted 11 bids with a consortium comprised of Sino Land Company, K Wah International Holdings and China Merchants Land winning the 88,258 square metre plot by agreeing to pay a land premium reported to amount to HK$3.05 billion.
With that purchase of phase 11 of Lohas Park equal to HK$34,558 per square metre of housing, it was the highest ever in the master-planned housing estate. This year Wheelock has, on the basis of the land premium, paid just over HK$30,518 per square metre of phase 12, or nearly 12 percent less than the price that the Sino Land consortium paid 10 months ago.