Chinachem Pays $210 Million for Hong Kong Land Amid Protests

Hong Kong’s government today sold a residential site for more than surveyors’ estimates, at an auction interrupted by protesters demanding the government make housing more affordable.

Closely held Chinachem Group bought the site in Kowloon Tong district for HK$1.63 billion ($210 million), beating the HK$1.54 billion median estimate of five surveyors in a Bloomberg News survey. That equals HK$17,976 a square foot, according to Centaline Property Agency Ltd., breaking a record for the Kowloon Peninsula set by an adjacent site sold in August.

Placard-wielding demonstrators briefly interrupted the sale, demanding curbs on home prices that have surged almost 50 percent since the start of 2009 on the back of record-low mortgage rates and an influx of mainland Chinese buyers. Kerry Properties Ltd. bought a smaller plot adjacent to the site sold today for 26 percent above the median estimate in August, adding to pressure on Chief Executive Donald Tsang to announce measures in his policy address tomorrow to cool prices.

“What it shows is that the market isn’t as fearless as it was before,” said Francis Lun, general manager at Fulbright Securities Ltd. in Hong Kong. “I don’t see the property market collapsing any time soon, but don’t expect it to rise as quickly as it did before.”

Luxury Homes

Chinachem will build a 12-story residential complex with 48 units that it could sell for as much as HK$22,000 per square foot, said Shun-Mo Ng, the company’s sales director. The site on Ede Road has a maximum buildable area of 8,424 square meters (90,676 square feet).

“We’re very optimistic about property prices in this area, so even though the price we paid is slightly high, we still think this is a good investment,” Ng told reporters after the auction. “There’s great demand for luxury housing in the market. Irrespective of what the chief executive announces in his policy address we still believe this will be a good investment.”

Midland Holdings Ltd., Hong Kong’s biggest publicly traded real-estate agency, estimates the development of the site could fetch as much as HK$22,000 a square foot.

“Some of the newer second-hand apartments in the area are already selling at HK$17,000 a square foot at the moment,” Alvin Lam, a surveyor at Midland, said before the auction. “It normally takes four to five years to complete a development and it’s safe to assume developers will aim to sell the project at around HK$22,000 a square foot eventually.”

Rising Prices

Kerry, the builder controlled by the family of Malaysian tycoon Robert Kuok, in August bought the smaller plot for HK$1.285 billion. That site set a per-square-foot record for the Kowloon Peninsula of HK$16,587, according to Midland.

The government may introduce rent-to-own subsidized housing amid a public outcry over surging home prices, the South China Morning Post reported Sept. 16.

Today’s auction was the eighth by the government in the financial year.

The number of secondary home sales in 10 of Hong Kong’s biggest private housing estates jumped 79 percent to 61 last week, according to Centaline. Home prices have surged almost 50 percent since the start of 2009, according to Centaline.

Most government land sales in recent years, including today’s 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.

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 more.

“This shows that developers are still optimistic in the luxury home market in Hong Kong,” said Charles Chan, a Hong Kong-based managing director at the valuation unit of Savills Plc. “Property prices in Hong Kong are likely to remain at the current high level in the next 12 to 18 months as interest rates are still low and the Hong Kong dollar is depreciating” along with the U.S. dollar to which it is pegged.

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