Hong Kong Sites May Lure Smaller Hong Kong Builders at Auction

Hong Kong’s government may today sell two residential sites to smaller developers that have been priced out by bigger rivals at auctions held to cool a property market that has surged to the highs of a previous peak in 1997.

The plots in the Fan Ling district in the New Territories and Chai Wan on the Hong Kong Island may fetch a combined HK$1.1 billion ($142 million), according to the median estimate of five analysts surveyed by Bloomberg News. At those prices the sites would be the cheapest sold in a government auction this financial year.

Hong Kong Financial Secretary John Tsang has increased sales of government land in a bid to curb home values that have surged 46 percent in the past year. Prices have exceeded estimates in both auctions held since the government stepped up measures to cool the property market Aug. 13.

“The big developers may be more conservative this time,” said James Cheung, a director at the surveying arm of Centaline Property Agency Ltd. “The sizes of the plots are smaller than the previous auctions so profit margins may not be as high. They are likely to attract more medium- to small-sized developers.”

Cheung Kong (Holdings) Ltd., Hong Kong’s second-biggest developer, paid more than estimated for two building sites on the Kowloon Peninsula four days after the government on Aug. 13 lifted down payments on some properties and announced it would sell more land for development.

Kerry Properties Ltd., controlled by the family of Malaysian tycoon Robert Kuok, on Aug. 31 paid HK$1.29 billion for a 77,469-square-foot plot in the Kowloon Tong district. The per-square-foot price of HK$16,587 is a record for the Kowloon Peninsula.

Mass Residential Units

Today’s auction will be the seventh in the current fiscal year and was initiated by the government.

The Fan Ling site has buildable area of 157,345 square feet and is forecast to be sold for HK$370 million, according to the Bloomberg News survey. The Chai Wan land has 155,346 square feet and is estimated to fetch HK$700 million.

The two sites may be developed into mass residential units, according to Centaline’s Cheung. Hong Kong’s government defines luxury apartments as those with an area of more than 1,000 square feet or valued at HK$10 million or above.

Most government land sales in recent years, including the last auction, have been triggered by developers who promised to pay minimum amounts for sites on a list of available lots under the so-called land application system. Regular government land auctions have been partially resumed this year after they were halted in 2004 to support falling home prices.

Surging Prices

Hong Kong’s government is closely monitoring the property market and may introduce further measures to contain prices if they continue to escalate, a Ming Pao report on Sept. 1 quoted Financial Secretary Tsang as saying.

Hong Kong home prices -- especially of luxury properties -- have been pushed up by record low mortgage rates and an influx of mainland Chinese buyers. They are now on par with the level of 1997, the height of a previous bubble that was followed by a six-year slump.

Hong Kong property stocks have advanced 11 percent since the government announced the new curbs in August, compared with the 2.1 percent increase in the benchmark Hang Seng Index.

To contact the reporters on this story: Kelvin Wong in Hong Kong at kwong40@bloomberg.net

To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.