Developers pick up Kai Tak's most valuable harbourfront land plot at 27 per cent discount as protests send property market into tailspin

By Lam Ka-sing / | November 26, 2019 11:57 AM SGT
A consortium of Hong Kong developers bought the most valuable parcel of residential land on the runway of the city's former airport for a discount, as six months of the city's worst political crisis sent the local property market into a tailspin.
China Overseas Land & Investment, Henderson Land Development, K. Wah International Holdings and Wharf Development together paid HK$15.95 billion (US$2.04 billion) for Area 4A Site 2 at the former Kai Tak airfield, barely meeting the lower end of a price range expected by valuers, according to data released by the Lands Department.
"The winning price is lower than expected, which means developers are relatively pessimistic about market prospects, fearing the market sentiment and vacancy tax will affect profits, though it can be a large project with sea view," said Thomas Lam, executive director at Knight Frank. "The price is indicative of the trend in land prices. Developers will become more cautious and selective in land buying."
A history of land sales in Hong Kong's former airport at Kai Tak. Source: SCMP alt=A history of land sales in Hong Kong's former airport at Kai Tak. Source: SCMP
Lam added the low price means the government has become more in sync with the market with its reserve price.
Stewart Leung, vice-chairman of Wheelock and Company, Wharf Development's parent, said the price was "reasonable" amid the current market sentiment, and the sizes of the flats that will be offered had not been decided yet.
Land prices will fall along with home prices amid protests, as "economic prospects are uncertain", said James Cheung, executive director at Centaline Surveyors.
"About HK$13,000 per square foot is at the level of plots facing Kwun Tong and Kowloon Bay. This plot facing the sea is hence comparatively cheap," he said. "[Developers] will not be too aggressive and will try a low price. If the economy is not good, there is definitely risk of a downward trend in home prices, affecting the prices offered. There is definitely downward pressure.
"Land prices are usually more sensitive than home prices," Cheung added. "If home prices drop 10 per cent, prices of some plots will drop more than that. But, of course, every plot is different."
Home prices have dropped 4.1 per cent from May to September, according to the Rating and Valuation Department. The Centa-City Leading Index slipped a further 0.9 per cent from early October to November 3.
Valuers had slashed their estimates for the site, which offers unobstructed views of one of the world's most iconic skylines across the Victoria Harbour from Kowloon, by between 15 per cent and 20 per cent, since Hong Kong's descent into regular anti-government protests that began in early June.
Valuations were cut by up to 20 per cent to reflect the worsening state of the city's economy following five months of social unrest, the US-China trade war and a looming vacancy tax, said Vincent Cheung, managing director at Vincorn Consulting and Appraisal, who cut his estimate to a range between HK$15.6 billion and HK$16.8 billion.
The consortium's bid topped bids by Sun Hung Kai Properties, CK Asset Holdings, and a third group comprising Sino Land, Great Eagle Holdings and Chinese Estates Holdings.
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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