Hong Kong Government May Sell Peak Property for $1.35 Billion
Hong Kong’s government may sell a building site in the Peak district for HK$10.5 billion ($1.35 billion) in an auction tomorrow, underscoring demand for high- end properties in the city.
The estimate for the Mt. Nicholson Road site is the median of seven analysts in a Bloomberg News survey. Their forecasts ranged from HK$8.9 billion to HK$11.5 billion, or HK$27,000 to HK$35,000 per square foot in terms of gross floor area.
The government is trying to curb a 38 percent surge in home prices since the beginning of 2009 amid concerns housing is out of reach of ordinary residents. The outcome of tomorrow’s auction may further buoy Hong Kong’s luxury homes prices, said Ricky Poon, a Hong Kong-based executive director of residential sales at Colliers International Ltd.
“A better-than-expected result at this auction will have a huge impact on buyer sentiment,” said Poon. He said he expects the site to fetch between HK$28,000 and HK$30,000 a square foot, and “anything beyond that will give the luxury property market a big boost.”
The city’s home prices have gained 9.6 percent this year and last week rose to the highest since 1997, Centaline Property Agency Ltd. said July 23. Home prices may rise another 10 percent in the second half if interest rates stay at two-decade lows and the local economy keeps growing, property consultant Jones Lang LaSalle Inc. said this month.
Authorities have introduced rules on new home sales and are investigating canceled sales at a Henderson Land Development Co. luxury apartment project.
Demand for luxury properties is being supported by a lack of new supply and an influx of mainland Chinese buyers, who account for about 20 percent of local residential transactions this year, said Collier’s Poon.
The site at 103 Mt. Nicholson Road, formerly used for government staff quarters, has a total gross floor area of 324,861 square feet (30,180 square meters). The auction was initiated by the government, which has pledged to increase land supply as part of its measures to keep home prices in check.
“Tomorrow’s auction will attract aggressive bidding from developers because of its prime location and harbor view,” said Alnwick Chan, a Hong Kong-based executive director at property consultant Knight Frank LLP. “It’s not easy to find another site on a similar scale on Hong Kong Island that could be used for building houses.”
Martin Lee, the youngest son of Henderson Land billionaire chairman Lee Shau-kee, in May paid HK$1.82 billion, or a record HK$68,200 per square foot, for a site on Barker Road in the Peak district at an auction held by Jones Lang. Lee said afterwards he would use the site to build houses for his family.
Most government land sales in recent years have been triggered by developers who promised to pay minimum amounts for sites on a list of available plots under the so-called land application system. Regular government land auctions were halted in 2004 to support falling home prices.
Sun Hung Kai Properties Ltd., the world’s biggest developer by market value, last month bought a site in the Ho Man Tin district for HK$10.9 billion. At HK$12,540 per square foot, it was the highest price paid in a government auction in urban Hong Kong since the market peaked in 1997. The gross floor area for the site is 869,000 square feet.
The Hang Seng Property Index, tracking seven of Hong Kong’s biggest developers, has risen 11.4 percent since the last auction on June 8, outperforming the 6.9 percent gain in the Hang Seng Index. The index rose 0.3 percent at 10:57 a.m. in Hong Kong today.
Sun Hung Kai said it sold 300 flats at Larvotto, a harbor- front luxury apartment project in Hong Kong’s Island South district, over the past two weekends. The sales brought in a total of HK$8 billion in revenue for the company and partners Kerry Properties Ltd. and Paliburg Holdings Ltd., it said.
Luxury homes in Hong Kong are those at least 1,000 square feet or costing at least HK$10 million.
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