Developers are lukewarm on Kai Tak's commercial plot as trade war impasse creates an anticlimax to a week of record home sales

By Pearl Liu pearl.liu@scmp.com / https://www.scmp.com/business/article/3009770/developers-are-lukewarm-kai-taks-commercial-plot-trade-war-impasse-creates?utm_medium=partner&utm_campaign=contentexchange&utm_source=EdgeProp | May 14, 2019 10:48 AM SGT
The second commercial property plot on the runway of Hong Kong's former airport received fewer bidders when a government tender closed on Friday, as the absence of a resolution in the US-China trade war provided an anticlimax to a week of record-breaking sales in the city's home market.
Area 4C Site 4 on the Kai Tak runway, valued at HK$11.2 billion (US$1.4 billion), or HK$13,000 per square foot for the 863,000 square feet (80,175 square metres) of gross floor area, received six bids, according to the Lands Department. A January tender for the first commercial plot was scrapped after the nine bids received failed to meet the government's minimum price.
Four days earlier, a plot of residential land on the runway sold for HK$12.6 billion, a record cost that translates into HK$30,000 per square foot in sales price when homes are built on the site, which means HK$30 million for a 1,000 sq ft apartment.
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"Developers are choosing to be cautious, and adopt a wait-and-see approach, after the escalation of the trade war," said Vincent Cheung, managing director of Vincorn Consulting and Appraisal, who expected at least seven to eight bids for the oceanfront plot. "The issues between the US and China will continue much longer than expected."
The oceanfront plot, located near the city's cruise terminal, offers full view of Victoria Harbour, which separates Hong Kong Island from the Kowloon peninsula and will host a hotel up to 800 rooms, and some office blocks.
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US-China negotiations to avert the year-long trade war between the world's two largest economies ended at noon when the tender closed, with 25 per cent of US tariffs on US$200 billion of Chinese imports going into effect. Hong Kong's benchmark Hang Seng Index fell 5 per cent this week.
Developers who did submit their bids included Sun Hung Kai Properties, CK Asset Holdings and Sino Land, according to agents and valuers familiar with the submissions.
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Kai Tak, left vacant after the city's airfield shifted to Chek Lap Kok in 1998, will be redeveloped into Hong Kong's second central business district. A total of five commercial sites are scheduled for tender on the site, three of them located on the former runway that juts into Victoria Harbour, offering unobstructed oceanfront view.
At least 30 per cent " and no more than half " of the gross floor area of Area 4C Site 4 will have to be reserved for a hotel, which can accommodate between 480 and 800 rooms, with the remainder zoned for commercial purposes such as offices or retail space.
Still, the projected population in the area may be insufficient to support large retail and commercial projects, which are more capital intensive to build, said Colliers International's head of valuation and advisory services Hannah Jeong.
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"There is doubt whether Kai Tak needs that much commercial space," she said.
Elsewhere in Hong Kong, sentiments remained upbeat in residential property, after Swiss bank UBS predicted a bull run in the segment that would last another 10 years.
At Wheelock Properties' Montara apartment complex in Lohas Park, potential buyers sent in 12,000 bids to vie for 116 flats that are being offered for HK$15,612 per sq ft after discounts. Buyers snapped up all 116 flats on offer, fetching the developer HK$940 million, agents said.
The buying frenzy followed last Saturday's showing at Montara, where 18,000 buyers " or 36 bidders for every available unit " competed for 500 apartments, yielding Wheelock a HK$4 billion haul that set a record for the biggest single-day turnover.
This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2019 South China Morning Post Publishers Ltd. All rights reserved.
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