Demand for homes seen withstanding govt efforts to cool property market
(HONG KONG) The Hong Kong government's HK$10.9 billion (S$1.98 billion) sale of a residential site at a public auction beat estimates and showed that home demand is withstanding efforts to cool the market
Potential home purchasers should consider their ability to pay before taking out mortgages, Financial Secretary John Tsang said yesterday in the government's latest effort to discourage a bubble forming.
'Citizens should consider the affordability before buying houses,' Mr Tsang told reporters.
Sun Hung Kai Properties Ltd, the world's biggest developer by market value, on Tuesday won the one-and-a-half hour bidding for the Ho Man Tin district site that was estimated at HK$8.41 billion, according to the median of seven analysts surveyed by Bloomberg News.
At HK$12,540 per square foot, it is the highest price paid in a government auction in urban Hong Kong since the market peaked in 1997, said Centaline Property Agency Ltd.
Home prices have risen 41 per cent since the end of 2008, prompting the government to tighten downpayment requirements for luxury homes in October to curtail speculation after record low interest rates fuelled the surge. Mr Tsang on May 12 pledged to keep boosting land supply.
'The above-expectations bidding price shows that the developers hold a positive outlook on urban sites for luxury homes, as currently it is obvious the supply for luxury homes is not sufficient,' Wong Leung Sing, an associate director of research at Centaline, one of the city's biggest real estate agencies, said by phone on Tuesday.
The Centa-City Index, a measure of Hong Kong's home prices, last week fell 1.44 per cent, its biggest weekly drop in more than 18 months.
Hong Kong may add as many as 60,000 homes in three to four years, Mr Tsang has said.
The price 'was not cheap but still reasonable', Fiona Wan, a spokeswoman at Sun Hun Kai, said by phone after the auction. The company expects to invest HK$18 billion to develop the site 'into a luxurious residential area'. The estimates ranged from HK$7.15 billion to HK$9.8 billion.
Home prices in Hong Kong rose the most among the world's major markets in the fourth quarter, property adviser Knight Frank LLP said in April. Average prices climbed almost 28 per cent from a year earlier in the city, while in China they advanced 25 per cent, a global index compiled by the London-based broker showed. They rose 3.4 per cent in the UK and fell 3.1 per cent in the US, according to the April 21 survey.
Hong Kong luxury home prices may rise 20 per cent this year as the economy expands and supply remains limited, real estate broker CB Richard Ellis Group Inc said in January. Luxury homes in the city are defined as those costing at least HK$10 million or bigger than 1,000 square feet (93 square metres).
The price per square foot for Ho Man Tin, a record for a site to build apartments in the Kowloon area, highlights demand for luxury homes on the other side of Victoria Harbour from the Central business district. Financial institutions including Morgan Stanley and Credit Suisse Group AG have moved into International Commerce Centre in the West Kowloon district.
'At this price, the unit price would be as high as HK$15,000 to HK$16,000 per square foot,' said Adrian Ngan, an analyst of CCB International Securities Ltd. 'I expect the gap between luxury and mass apartments would widen after this land sale.'
New apartments in the district, which include those at projects such as Cheung Kong (Holdings) Ltd's Celestial Heights and New World Development Co's Wylie Court, are selling for about HK$12,000 to HK$13,000 a square foot, according to Alnwick Chan, executive director at Knight Frank.
The family of billionaire Lee Shau Kee, who controls Henderson Land Development Co, on May 18 paid HK$1.82 billion for a 53,350-square-foot plot of land on the Peak in an auction of non-government land. On a per-square-foot price of HK$68,200, the land was the city's most expensive in an auction, Jones Lang LaSalle Inc said after conducting the sale.
The average price of HK$12,540 psf paid for Ho Man Tin is the highest for an apartment site in a government auction since 1997, when Chinachem Group bought a parcel in Hong Kong Island's Repulse Bay area for HK$16,256 psf. It is the first time the government has sold a site for more than HK$10 billion since March that year, when a group led by Sino Land Co paid HK$11.8 billion for a site in the Siu Sai Wan district in eastern Hong Kong Island.
The Ho Man Tin plot has a total area of 16,151 sq m and building area of 869,000 sq ft. -- Bloomberg
Source: Business Times, 10 Jun 2010