May 13 (Bloomberg) -- Hong Kong’s government sold three residential sites above analyst estimates, highlighting developers’ confidence that property curbs haven’t damped demand and the economy expanded in the first quarter.
Sun Hung Kai Properties Ltd. bought a site on Stubbs Road close to the Peak luxury housing district on Hong Kong Island for HK$4.49 billion ($578 million) yesterday, equivalent to HK$24,829 per buildable square foot, according to calculations by Centaline Property Agency Ltd. It was expected to be sold for almost HK$4.4 billion, the median estimate of five surveyors and analysts polled by Bloomberg News.
Government measures to cool surging real estate prices are unlikely to dent appetite for luxury apartments in locations where fewer plots are available for sale, said Eva Lee, a property analyst at Macquarie Securities Ltd. Hong Kong’s economy grew more than 7 percent in the first quarter, sustaining an expansion that faces the threats of accelerating inflation and a property-market bubble.
“Developers are still very confident about their abilities to sell homes at prices at or above their current prices in a couple years’ time,” said Vincent Cheung, national director for valuation and advisory at Cushman & Wakefield Inc.
Estimates for the Stubbs Road site, with a buildable area of 180,835 square feet, ranged from HK$3.6 billion to HK$4.5 billion, with the median translating to HK$24,000 a square foot.
Sun Hung Kai, the world’s biggest developer by market value, plans to invest HK$8 billion in the project, Victor Lui, an executive director at its property agency unit, said in an interview yesterday.
China Overseas Land & Investment Ltd. bid HK$579 million for a site in the Kowloon Tong area, beating the HK$500 million median estimate. Cheung Kong (Holdings) Ltd., controlled by Hong Kong’s richest man Li Ka-shing, paid HK$662 million, 60 percent above the HK$410 million median, for a piece of land in the Yuen Long district.
China Overseas, the Hong Kong-listed developer controlled by the nation’s construction ministry, will spend about HK$850 million building houses on the site, Tony Yau, general manager for the company’s Hong Kong operation, told reporters after the auction. The company estimates the units will be sold at about HK$26,000 a square foot, Yau said.
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 city’s first-quarter gross domestic product increased 7.2 percent, the government said on its website today, exceeding the 5.5 percent median estimate in a Bloomberg News survey of 17 economists.
Financial Secretary John Tsang said this week that the government is aiming to cool the real-estate market and restrain excessive credit growth.
Housing prices in the city, ranked the world’s most expensive place to buy a home by Savills Plc, gained more than 55 percent in the past two years on record-low mortgage rates and an influx of buyers from China.
The auction results come as home sales dropped to the lowest volume in more than two years in April and some developers have cut prices of new apartments since the end of last month.
Hong Kong’s home prices fell 0.2 percent in the seven days ended May 8 from a week earlier, according to Centaline. The Centa-City Leading Index, an indicator of housing prices in the city, dropped to 97.45, it said in an e-mailed release today.
Property Stocks Rise
The Hang Seng Property Index, which tracks seven of the city’s biggest developers, rose 1.2 percent at the close in Hong Kong, paring its loss this year to 3.7 percent, compared with the benchmark Hang Seng Index’s 1.1 percent gain.
The Stubbs Road and Kowloon Tong parcels “reflect the market still has strong demand for luxury properties in the city,” said James Cheung, a surveyor at Centaline, Hong Kong’s biggest closely held realtor.
The average price of apartments in the Stubbs Road area, which lies below the east of the Peak district and consists 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, Cheung said.
“High-end properties always have better holding value in the long run,” said Macquarie’s Lee in an interview at a conference in Hong Kong yesterday before the auction. “A site this size hasn’t been available in this area for a long time, and I doubt if there’ll be another one in the near future.”
The three sites sold yesterday are among the nine the government plans to sell through auction or tender in the second quarter.
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