Going once, Going twice
Tai Po land sales restore some sanity to property prices
| Text : Alex Frew McMillan | Photo : www.stockxpert.com |
Over the recent holiday period, Tai Po was temporarily the centre of Hong Kong’s property world. The government’s Land Department held its second land auction of the fiscal year and its first big land sale in two years. Held at the Queen Elizabeth Stadium in Wanchai, two lots were on sale with both sizes over 225,000 square feet and with panoramic sea views at Pak Shek Kok along the Tolo Harbour.
Considering the recent property bubble, analysts had predicted some sparkling figures for how much the lots would fetch. However they were disappointed. Although the winning bids easily exceeded the reserves, they fell at the lower end of the market forecasts.
Sino Land was the winning bidder in both sites, paying HK$5.15 billion for the first plot which was bought outright, and putting down HK$5.25 billion for 85 percent ownership. The second site was bought in a joint venture with K Wah International, which owns a 15 percent stake.
The bidding wasn’t as frenzied as expected but the brokers say that this may be a good sign. In fact, the auction’s prospect had been having a chilling effect on sales throughout Hong Kong with property owners licking their chops over the prices their holdings would fetch if the Tai Po sales set some kind of record.
Now, a few days after the sales have passed, some sanity has been shown, and buyers and sellers seem ready to share their thoughts. “Before the auction, lots of vendors raised their asking price. A lot of them withdrew their properties temporarily to see what would happen,” says John Au-yeung, a broker with Fidelity Real Estate & Management Co. “After the auction, the market is a little bit more rational.”
Competition among developers wasn’t as fierce as a lot of people expected that it might have been. And some of the reputable developers didn’t even show up. The take on the sales was that property prices might be reaching some kind of peak.
It was not that the sales were a total bust. In fact, the winning bids represent an average price of HK$7,214 per square foot just for the land. The government estimates that the lots possess capacity for around 1,000 residential units. This is 29 percent up from the price that Sino Land paid for three lots in Tai Po back in 2007 - a pretty decent price hike.
It’s not surprising that Sino Land was the most aggressive bidder. It already has a large land bank in Tai Po and it can link up the two new sites with the land it bought two years ago. While they have the scale to make big plans for Tai Po, other developers may have been put off by the prospect of winning a single lot, which wouldn’t have given them the same economies of scale.
Maybe it’s just as well that the heady forecasts for the auction weren’t achieved. The market has still slowed down substantially at the turn of the year, while Hong Kong buyers and sellers absorb what happened in an incredibly volatile market last year. “The market is still going quite slowly compared with two months ago,” says Au-yeung. “After the auction, some vendors say they are willing to cut their prices, but the prices they are asking are still very, very high after the discount.”
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