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Hong Kong Sells Locals-Only Home Sites for $585 Million

Hong Kong Sells Local-Buyers-Only Home Sites for $585 Million
Residential buildings stand in the eastern district of the Kowloon Peninsula in Hong Kong. Photographer: Jerome Favre/Bloomberg

Hong Kong sold two residential sites on which apartments built can only be sold to local buyers at a price higher than estimates.

A unit of China Overseas Land & Investment Ltd. paid HK$4.54 billion ($585 million) for the two sites in the city’s Kowloon East district, according to a Hong Kong government statement yesterday. That compares with a HK$4.23 billion mean estimate of five property brokers surveyed by Bloomberg News.

Restricting sales of some units to Hong Kong residents was a part of Chief Executive Leung Chun-ying’s plan to curb home prices that have more than doubled since the beginning of 2009 amid record low mortgage rates and an influx of mainland Chinese buyers. Home transactions fell for a third straight month in May, following the introduction of extra transaction taxes and higher minimum mortgage down payments in February.

“Whatever risks that come with the restrictions have already been factored in the prices,” James Cheung, a surveyor at Centaline Property Agency Ltd., said before the tender results were announced. “This is the first time sites that come with such restrictions are sold so there isn’t much of a reference for developers.”

The two sites, with maximum allowed gross floor areas of 38,855 square meters (418,232 sq. ft.) and 42,925 square meters, attracted 16 bids and 13 bids respectively, the government said yesterday. Developers must build a minimum of 545 and 600 units on the sites, it said.

Rising Prices

Hong Kong home prices rose for three straight weeks to May 26, after dropping 3.4 percent in April, according to an index compiled by Centaline.

The government doubled sales tax on all property transactions over HK$2 million in February. Previously, it charged an extra tax of as much as 20 percent of the value of homes resold within three years and raised the minimum down payment on mortgages for homes costing more than HK$7 million. It has also imposed an extra 15 percent tax on all home purchases by companies and non-residents, and promised to raise land supply.

Home prices in the city may fall as much as 20 percent in the next two years, Deutsche Bank AG said in March.

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