Hong Kong will sell three land parcels in an auction tomorrow that comes after home sales in April fell to the lowest volume in two years following government measures to stem surging prices.
The most expensive site -- on Stubbs Road, Hong Kong Island -- may be turned into luxury housing projects and is expected to fetch almost HK$4.4 billion ($566 million), based on the median estimate of five surveyors and analysts polled by Bloomberg News. Another site in the Kowloon Tong area may get HK$500 million, while the parcel in the Yuen Long district may be sold for HK$410 million, according to the survey.
Home sales dropped to the lowest volume in more than two years in April and some developers have cut prices of new homes since the end of last month. The government in November increased property transaction taxes and pledged to boost land supply amid public protests that prices are becoming unaffordable and as the central bank warned about the risk of a “credit-fueled property bubble.”
“The price being paid will still be good, though developers are now more rational given how the market has performed lately,” said Adrian Ngan, a Hong Kong-based property analyst at MF Global Holdings Ltd.
The government two weeks ago sold a parcel in the Hung Hom area at a price close to the top estimate of analysts in its first auction of the year. Housing prices in the city, ranked the world’s most expensive place to buy a home by Savills Plc, have gained more than 55 percent in the past two years on record-low mortgage rates and an influx of buyers from China.
The Hang Seng Property Index, which tracks seven of the city’s biggest developers, fell 0.2 percent at the noon trading break in Hong Kong today, bringing its loss this year to 3.6 percent. This compares with the 1.6 percent gain in the benchmark Hang Seng Index.
Estimates for the Stubbs Road site, with a buildable area of 180,835 square feet, range from HK$3.6 billion to HK$4.5 billion, with the median translating to HK$24,000 a square foot.
The site lies below the east of the Peak district in a “traditional luxury housing area which rarely has land put up for sale,” according to James Cheung, a surveyor at Centaline Property Agency Ltd., Hong Kong’s biggest closely held realtor who estimates the site will fetch HK$20,000 a square foot.
The average price of apartments in the area, consisting mainly of buildings more than 30 years old and with some overlooking the Happy Valley race course, is now about HK$18,000 a square foot, he said.
More Land Sales
The three sites up for sale tomorrow are among the nine the government plans to sell through auction or tender in the second quarter. Hong Kong is considering announcing its land sale schedule at the beginning of each quarter, Financial Secretary John Tsang said last month.
The government may auction as many as 52 plots of land this year, Tsang said in his Feb. 23 budget speech. The land could yield 16,000 units, almost 80 percent more than from land sold last year.
A group between Nan Fung Development Ltd. and Wing Tai Properties Ltd. on April 27 paid a higher-than-estimated HK$9,934 a square foot for a residential site in Hung Hom.
Developers including Cheung Kong Holdings Ltd. and Henderson Land Development Co. have cut prices of new apartments at some of their projects by as much as 30 percent since the Easter Holiday in late April on concern that higher mortgage rates and the government curbs may dent home-buying sentiment.
Hong Kong’s bank interest rates will rise on loan demand and capital outflows when the U.S. increases borrowing costs, Hong Kong Monetary Authority head Norman Chan said on April 28.
Some of the city’s biggest lenders, including Standard Chartered Plc and BOC Hong Kong (Holdings) Ltd., raised mortgage rates in April after the warning from the city’s de-facto central bank, which is prevented by Hong Kong’s currency peg to the dollar from raising interest rates.
The number of units that changed hands last month declined 37.6 percent from a year earlier to 7,635, according to a statement on the Land Registry website. That’s the lowest since March 2009, according to data compiled by Bloomberg.