Hong Kong Pulls Land Site From Tender After Bids Fail to Meet Expectations

The Hong Kong government yesterday withdrew the tender for a property project at a subway station and sold another site for less than estimated, underscoring concerns that home prices in the city may fall further.

The company set up by the government to manage Bayside, a project above a station in the city’s northwest, rejected tenders for the site, according to a statement. The site, with gross floor area of 2.2 million square feet, was expected to fetch HK$7.4 billion ($953 million), according to the median estimate of five surveyors in a Bloomberg News survey.

Home prices in Hong Kong increased 70 percent between the beginning of 2009 and their 14-year-high in June and have since fallen 3.5 percent as increased borrowing costs and taxes deterred buyers. The government tightened mortgage lending requirements and restarted scheduled land auctions, which were halted in 2004, to help slow surging prices.

“It’s obvious developers are getting more cautious,” said Eddie Hui, a professor in the Department of Building and Real Estate at the Hong Kong Polytechnic University. “They’re very mindful of all the additional supply that will be put into the market by the government.”

Home prices in Hong Kong, the world’s most expensive place to buy a home according to Savills Plc, may fall as much as 25 percent between now and 2013, according to Andrew Lawrence, Hong Kong-based analyst at Barclays Capital Research.

Below Estimates

A second site put up for tender above the station in Tsuen Wan West was sold to Chinachem Group. The closely held developer, controlled by the family of the late Nina Wang, paid HK$2.6 billion for the 711,000 square-feet Cityside project adjacent to Bayside, the company said in a statement. That site was expected to sell for HK$2.7 billion, according to the Bloomberg News survey.

The government is one of the city’s biggest suppliers of unoccupied land for housing. MTR Corp. (66), Hong Kong’s railway operator, sells land to developers for a portion of their profit from the resulting projects.

The two sites at Tsuen Wan West attracted 12 tenders, Sallus Wong, a spokeswoman for MTR, said in a phone interview on Jan. 9. The two projects will contain about 3,300 residential units.

Tsuen Wan, in the northwestern area of Hong Kong, is a mixed residential-industrial district about a 45 minute subway ride to the city’s Central business district. Chinachem is one of the biggest landlords in the area with landmarks including Nina Tower, named after its late chairwoman.

Separately, the government sold a site in the city’s northeastern Tseung Kwan O district to Wheelock Properties Ltd., the developer controlled by billionaire Peter Woo, by tender for HK$1.86 billion, the company said yesterday.

The Hang Seng Property Index, which tracks the seven biggest builders in Hong Kong, lost 24 percent in 2011, compared with the 20 percent drop in the benchmark Hang Seng Index, of which it’s a component.

To contact the reporter 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

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