Kai Tak runway parcel tender receives muted response even after valuation is cut by 15 per cent

By Lam Ka-sing kasing.lam@scmp.com / https://www.scmp.com/property/hong-kong-china/article/3036906/kai-tak-runway-parcel-tender-receives-muted-response-even?utm_medium=partner&utm_campaign=contentexchange&utm_source=EdgeProp | November 26, 2019 11:57 AM SGT
The tender for a sea-facing plot of land on the runway of Hong Kong's former airport received only four bids even after its valuation was cut by 15 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. The four bids are on par with a record for the lowest number of bids, set by Area 4A Site 1, another plot, in July.
Sun Hung Kai Properties, CK Asset Holdings, a consortium of Sino Land Company, Great Eagle Holdings and Chinese Estates Holdings as well as a consortium of China Overseas Land & Investment, Henderson Land Development, The Wharf (Holdings) and K Wah International put in bids for the residential parcel, Area 4A Site 2, in Kai Tak. The plot can yield a gross floor area of 1.2 million sq ft, or 18.66 soccer fields.
"It is at the bottom end of our expectations ... as the environment is not very good. Before, there would be six or seven bids," said Alex Leung, senior director at CHFT Advisory And Appraisal, who was expecting four to six bids.
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He added that since the plot area was large only bigger developers could participate. It is the biggest and most valuable plot on the runway.
An aerial view of the runway at the old Kai Tak airport. Photo: Martin Chan alt=An aerial view of the runway at the old Kai Tak airport. Photo: Martin Chan
James Cheung, executive director at Centaline Surveyors, also noted the number of bids was "lower than expected".
Thomas Lam, executive director at Knight Frank, cut his valuation for the plot by 15 per cent to up to HK$19.8 billion (US$2.53 billion), or HK$15,500 to 16,500 per square foot.
Lam said flats, most likely to range from 450 sq ft to 750 sq ft, could sell for more than HK$30,000 per square foot, with the total development cost estimated at between HK$23 billion and HK$25 billion.
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This week, investment group CLSA said in a report that home prices could drop 20 per cent from their peak in the next 12 months, noting that the market was still in the initial phase of a correction and that the decline might accelerate in the current quarter.
It added that this would be the first time all segments of the property market were likely to be in decline since the severe acute respiratory syndrome epidemic in 2003. It forecast grade A office rents would sink 20 per cent in the coming 12 months, shops rents by 35 per cent and retail sales by 25 per cent.
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CLSA noted that the impact of the protests and the US-China trade war was similar to that of Sars, with economic growth slowing in the last 18 months, the Hang Seng Index falling, the yuan depreciating and tourist arrivals diving.
Hong Kong's economy has already slid into recession, with Dutch bank ING predicting its 2020 growth could shrink by 5.8 per cent, which would make it the worst contraction since the city's return to Chinese sovereignty, if protest and violence continues for a year.
Elsewhere, Grand Ming Group Holdings had sold 186 out of the 292 flats, or 63.7 per cent, on offer at its The Grand Marine project in Tsing Yi as of 5.55pm on Friday. Oma Oma in Tuen Mun by Wing Tai Properties sold just one out of 92 flats available for open sale. Mount Regency Phase 2 by Sun Hung Kai Properties in Tuen Mun sold none out of 10 flats on offer.
Swire Properties reported that retail sales at Pacific Place in Admiralty and Citygate Outlets in Tung Chung in the three months ended September were down 11.8 per cent and 3.1 per cent, respectively, amid protests.
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.
Copyright (c) 2019. South China Morning Post Publishers Ltd. All rights reserved.