Wheelock Properties has won a residential site in Hong Kong’s Kennedy Town at a lower-than-expected price of HK$1.72 billion ($220 million) as the housing market continues to cool in the Asian financial hub.
Hong Kong’s Lands Department announced the winning bid for the 24,327 square foot (2,260 square metre) site in an announcement on Wednesday, with the top offer coming in at around 18 percent below earlier market estimates after homes sales slid by 13 percent during the second quarter.
Based on the price per square foot of maximum buildable area, Wheelock is paying around 30 percent less for its piece of Kennedy Town than Grand Harvest (HK) Development paid for a nearby parcel in the same district last November, with market observers pointing both to challenges inherent in the tender requirements, and to slowing market conditions, in explaining the tender outcome.
“Although the property market sentiment improved slightly at the beginning of the year after all anti-pandemic measures were lifted and the border reopened, the market has started to slow down in the middle of the year,” said Cyrus Fong, director and head of valuation and consultancy at Knight Frank.
With the project approved for development of up to 243,266 square feet of gross floor area, which could yield 450 new homes, the developer controlled by tycoon Peter Woo secured the site at the junction of Sai Ning Street and Victoria Road for the equivalent of HK$70,706 per square foot of housing.
“The group has rich experience in Hong Kong Island development and has launched many high-end residential projects in the same district,” Leung Chi Kin, chairman of Wheelock said in a statement. “Familiar with the advantages and characteristics of this area, this experience will help us make the new project the next landmark housing estate in the West District.”
Located in the westernmost part of Hong Kong Island, Wheelock’s upcoming project will overlook Victoria Harbour and is also within 10 minutes’ walking distance of Kennedy Town MTR station. The company was a joint venture partner with Sun Hung Kai Properties and Henderson Land in developing Kennedy 38, a condo project located 800 metres (0.5 miles) east of its new site, with that project having been well received by the market at its launch in 2021.
The developer bested five competing proposals submitted by Sun Hung Kai Properties, CK Asset Holdings, K. Wah International, Great Eagle Holdings and a joint venture between Sino Land and China Merchants to win the 50-year leasehold rights.
$520M Project Soon to Rise
Developers bidding on the site are likely to have taken into account development challenges inherent in the tender which extended the construction period, according to Vincent Cheung, managing director at Vincorn Consulting and Appraisal.
With Wheelock required to relocate a bus terminal currently occupying the site, and preserve ficus trees as well as a memorial to the Tung Wah Smallpox Hospital which once occupied the plot, Cheung estimated that development costs for the project could reach HK$4.1 billion ($520 million) or about HK$17,000 per square foot of gross floor area. He predicted that sale prices for homes in the project would likely exceed HK$25,000 per square foot.
“The experienced and large-scale developer would have more advantages to handle and manage such a development site,” he said. “In addition, the US Fed rate hike may continue, the prolonged construction period amid the site challenges will increase the development cost uncertainty.”
Market Slows in Q2
Alex Leung, senior director with CHFT Advisory and Appraisal said that the market expected the site to sell for at least HK$2.1 billion, and attributed the result to weakening homebuyer sentiment.
Data from Cushman & Wakefield released on Thursday shows that residential transactions across Hong Kong dropped by 13 percent in the second quarter, compared to the preceding three months, with only about 12,200 units changing hands after an encouraging start to the year. Compared to the same period in 2022, home sales were down by 18 percent in the April through June period.
With deals declining in the face of higher interest rates and ongoing economic uncertainties, Hong Kong’s market-wide residential price index slid by about 1 percent last quarter but still recorded 5 percent growth for the first half, compared to the same period in 2022, according to the property agency.
Despite cooling market sentiment, Cushman & Wakefield expects residential transactions this year to grow by 10 to 15 percent compared to 2022 to reach as much as 50,000 units. The consultancy predicts that home prices for the full year will grow by between 3 to 7 percent compared to the preceding 12 months.