Former Hong Kong airport site sells at low end of expectations, signalling caution as major developers scout for residential land

By Sandy Li and Pear Liu / | April 1, 2019 6:37 PM SGT
The largest residential site at Hong Kong's former Kai Tak airport has been sold to a consortium of four major developers, including Henderson Land ­Development and Wheelock Properties, for HK$9.89 billion (US$1.26 billion), matching the low end of expectations as developers adopt a cautious market outlook.
The Lands Department awarded the tender for the plot, which can yield 722,060 sq ft in gross floor area, to Infinite Sun on Wednesday. Other members of the alliance include China Overseas Land & Investment and New World ­Development.
At HK$13,701 per square foot of gross floor area, the successful bid for the Kai Tak Area 4B Site 1 ranks as the second-lowest for a purely residential plot in the area. Market expectations were for the site to fetch between HK$9.4 billion to HK$10.8 billion, or HK$13,000 to HK$15,000 per square foot.
"Teaming up, which can avoid direct competition with each other and bidding up the price, seems to be a best answer to be in the game while not paying too much and taking too much risk," said Charles Chan, managing director at Savills Valuation and Professional Service.
"We saw in a number of occasions in recent years that developers joined together and formed consortiums to bid for large government sites," said Dorothy Chow, senior director at JLL's valuation department.
"The market has still been uncertain in terms of the outcome of the US-China trade war, interest rate movements and external economic conditions."
Such caution, however, is in contrast to a straw poll conducted by the Post indicating more than half of market observers believe that the correction in Hong Kong's home prices is over.
Thirteen out of the 23 respondents, including developers, said they expected prices of new homes to rise by up to 15 per cent on the back of pent-up demand.
The rest, however, expected prices to fall further, by as much as 5 per cent, because of the uncertain global economic outlook.
The plot's sale comes as the Legislative Council's housing panel plans to discuss a vacancy tax scheme on Monday.
"Builders will definitely take into account the proposed vacancy tax when they submit bids," said Thomas Lam, executive director at Knight Frank.
Wheelock Properties chairman Stewart Leung Chi-kin said the total investment of the plot would be HK$16 billion.
"We submitted the bid after careful consideration of our condition," Leung said.
"The factor of a vacancy tax is not included. We do not believe the government intends to
suppress developers," he added.
Leung's company is one of the largest land holders in Kai Tak after Sun Hung Kai Properties.
It owns more than 1 million sq ft in two sites, along with another two plots " including its latest winning bid " through two different consortiums.
Vincent Cheung, managing director at Vincorn Consulting and Appraisal, expects flats on the plot would have to sell for HK$22,500 to HK$25,000 per square foot.
Six developers submitted tenders for the plot when it closed on Friday.
Among the companies vying for the site were Sun Hung Kai Properties, CK Asset, Chinachem Group, K & K Property and a joint venture between K Wah International and Sino Land.