The sq ft price is only HKD4,546, 62% lower than that of the private housing land won by Chinachem in the same district the previous year.
The starter homes project launched by the Hong Kong government with a method of selling land for the first time was successfully approved. This land site in Anderson Road, Kwun Tong, was unexpectedly won yesterday by Cheung Kong for HKD4.951 billion, with the sq ft floor area land price at HKD4,546, which is the lower limit of market prediction. The sq ft price is 62% lower than that of the private housing land won by Chinachem in the same district at the beginning of 2018. It is estimated that the price was affected by the complicated terms of the starter homes project and the epidemic. The project can build 1,700 units, of which 1,000 units are the first housing units. It was four years ago for Cheung Kong's last purchase of government land. The developer yesterday pointed out that it hopes the project will contribute to the housing supply in Hong Kong.
Hong Kong Wen Wei Po Journalist Ngan LunLok
In recent years, Cheung Kong has almost been frustrated every time on the land sales market, and finally tasted the "victory" yesterday. The Lands Department announced that Cheung Kong won the residential site in Anderson Road of Kwun Tong for HKD4.951 billion with the sq ft floor area land price at HKD4,546. The price is the lower market limit since the market valuation previously was HKD4.57-8.71 billion. The Executive Director of Cheung Kong, Ng Kai-Hing, expresses that the Group is pleased to win the land and hopes to contribute to housing supply in Hong Kong through the relevant development project. Cheung Kong's last time of winning an official land was to purchase residential land in Lai Ping Road, Kau To, Sha Tin, for HKD1.953 billion in 2016.
Cheung Kong: Hopes to contribute to housing supply.
The project received nine bids last Friday. In addition to Cheung Kong, there were also China Overseas, Sino, K.Wah International, Grand Ming Group, Wheelock, and a joint-ventured party by Henderson, The Far East, and Empire Group. Finally, Cheung Kong won the bid with the highest price, meaning that many other developers and the consortium offered lower bids. A surveyor of Centaline Surveyors Limited, Cheong King-Tat, expresses that the tender results reflect developers' pessimism on the future property market, and there were not exclude an attitude of bargain hunting.
It is the second land being sold around stone quarries in Anderson Road, and the first is a private housing land that sold in January 2018. At that time, Chinachem won for over HKD3.1 billion, with the sq ft floor area land price up to HKD12,000. The current sq ft price is 62% lower than that of two years ago. The land won by Chinachem may eventually face the risk of loss. But it is worth noting that Chinachem also participated this time, and the bid was lower than that of Cheung Kong.
The first housing project has many restrictions, affecting the bids.
The Executive Director of Knight Frank, Lam Ho-Man, believes that the price decrease is due to the epidemic, the complicated land sale terms, and the higher proportion of first housing units. Factors such as insufficient regional facilities and significant investment will also affect bids. However, he considers that current land sale has an indicator role, and developers have a positive attitude towards the development of the first housing project. He believes that the government would add relevant first housing clauses on the sale of some suitable land (such as the Northeast Development Zone) in the future, and speed up the construction of public housing through private developers' power.
Lam Ho-Man estimates that the total investment of the project (including construction costs) is about HKD9-9.5 billion, and the sq ft price after completion would be above about HKD15,000.
The Director of the Midland Surveyors, Lam Chi-Pun, expresses that the transaction price was in the lower limit of market expectations. However, the Anderson Road project is located in the urban area, has high-terrain, and views an open landscape. So, the low price may because developers had calculated the related factor of more restrictive development terms. It is believed the government had also adjusted the base price of the project according to market conditions.
One thousand units must be put on sale at 20% off the market prices.
According to the data, the land size of this tender is broad, covering an area of about 217,078 sq ft, and the buildable floor area is about 1.089 million sq ft. However, the land sale conditions of the project are more restrictive. It specifies that the floor area for the first housing will be about 470,000 sq ft, and starter homes must be above 1,000 units, which will be put on sale at 20% off the market prices. The usable areas are limited to 247-495 sq ft, with about 55% are two-bedroom units, 25% are one-bedroom units, and 20% are open style units.
The project has another 700 units that can be used for private residential purposes. But the above area restrictions cover the entire project in disguise since the government would randomly select the units for the use of starter homes. The developer must entrust a surveyor to write a valuation report on the units and submit it to the government for reference. The Transport and Housing Bureau also has the right to determine the market price.
Besides, the land sale clause also stipulates that the project can only be put on sale after the occupancy paper is issued, and the starter homes need to be arranged for purchase first. In disguise, the pre-sale period is significantly shortened, affecting the developer's cash flow arrangement and increasing development investment risk. Due to the short pre-sale period, developers are more likely to face the risk of vacancy tax, which would increase investment risk, add uncertainties to a certain extent, and affect revenue.