(Journalist Ngan Lun Lok)
Developers' intention to invest in the land has greatly diminished under the situation of the epidemic that is affecting the global economy. The bid for the land site in Reclamation Street, Mong Kok, and Shanghai Street opened yesterday, and a company of Peng Ching Asia (0936) won. The land price is HKD85.9 million, lower 22% than the market valuation lower limit of HKD110 million. And the sq ft floor area land price is only HKD3,512, the lowest price of urban land in more than a decade.
The sq ft floor area land price is only HKD3,512.
The Managing Director of Wang Leung Consulting and Evaluation, Cheong Kiu-chor bluntly states that he is surprised by the bidding result because the bid price was significantly lower than market expectations. He describes the current sq ft land price is as equivalent to the land price of New Territories in recent years. He believes that the results of this tender show the government's willingness to make concessions on the reserve price under current market conditions. That is, the government would rather sell the land than to have a fail tender. It is estimated that developers would test the government's bottom line in future sales of land. There might be more land transactions at a low price in the market.
The Executive Director and Director of the Valuation and Consulting Department of the Knight Frank. Lam Ho-Man expresses that the land being sold at fire-sale prices that lower than expected reflects that small developers are anxious about the market outlook. In particular, "tiny land" has high development risks and low-profit margins. Developers step back and concede prices because of factors such as the outbreak of the epidemic, the economic downturn, rising unemployment, and the complexity of land purchase clauses. It is estimated that the project will mainly build units of 300-450 sq ft.
However, he points out that the site area is small and divided into two plots of A and B by a back alley. It is relatively difficult to be developed. Besides, the surrounding is mainly buildings. And the estimated total investment is about HKD160-200 million. After completion, it would have a reasonable profit if the sq ft price will rise above HKD10,000. Lam Ho-Man believes that this is an individual case. It means that most developers are worried about the market outlook if other large sites will be sold at low prices or come across a failure of bid in the future.
