Aug. 31 (Bloomberg) -- Hong Kong developers may pay a record per-square-foot price for government land on the Kowloon Peninsula in an auction today even after new measures to cool home prices, some analysts said.
The site on Ede Road in the Kowloon Tong district may fetch HK$1.02 billion ($131 million), or HK$13,167 per buildable square foot, according to the median of a five analyst estimates in a Bloomberg News survey. The previous record was set in June, when Sun Hung Kai Properties Ltd. paid HK$12,540 a square foot for a site in the nearby Ho Man Tin district.
The government on Aug. 13 raised down-payment ratios and said it will increase land supply amid concerns housing is becoming unaffordable. Four days after the announcement, Cheung Kong (Holdings) Ltd., controlled by Hong Kong’s richest man, Li Ka-shing, paid more than estimated for two building sites in a government auction, one of them also in Ho Man Tin.
“The site is at a good location in a traditional luxury residential area,” said Ringo Lam, director in the valuation department of surveying firm AG Wilkinson & Associates, who forecast the site to be sold for HK$1.1 billion. “Also, the relatively small amount of capital needed to invest means more developers can afford to compete for it.”
The value of today’s site maybe further bolstered by two adjacent plots that the government may sell in the future, as they can be jointly developed into a large-scale residential complex with a higher profit margin, said Lam.
Today’s auction will be the sixth in the current government fiscal year and was triggered by developers’ applications. The opening bid for the lot will be HK$659 million ($84.8 million), the Lands Department said in a release posted on its website.
Smaller Parcel
The Ede Road site has a total buildable area of 77,469 square feet (7,197 square meters), compared with the 394,000 square feet of the Ho Man Tin site purchased by Cheung Kong earlier this month and 869,000 square feet of the one bought by Sun Hung Kai in June.
“This is a much smaller parcel and we also don’t think its location is as attractive as the couple of Ho Man Tin sites sold over the last few months,” said Alnwick Chan, Hong Kong-based executive director at Knight Frank LLP, who forecast an auction price of HK$9.3 billion. “There’ll still be quite a few bidders going for it, but I doubt it’ll be as intense as the last one.”
Analysts’ estimates for the Kowloon Tong site range from HK$930 million to HK$1.1 billion.
The government will auction two residential sites in the Fanling and Chai Wan districts on Sept. 29 as part of Financial Secretary John Tsang’s plan to curb home prices. The government will also work with MTR Corp. and the Urban Renewal Authority to increase land supply.
The government may also change the purpose of some land to residential, Tsang added. MTR is one of the biggest owners of unoccupied residential sites in Hong Kong.
Hong Kong property stocks has fallen 2.7 percent since the government announced new measures to curb home prices Aug. 13, compared with the 1.6 percent decline in the Hang Seng Index.
Prices Surge
Hong Kong’s home prices have surged about 45 percent since the beginning of 2009 on record low mortgage rates and the influx of wealthy mainland Chinese buyers, according to Centaline Property Agency Ltd.
Sun Hung Kai on June 8 paid HK$10.9 billion for a residential site in Ho Man Tin. The price, which beat an estimate compiled by Bloomberg News by 30 percent, is the highest paid in a government auction in urban Hong Kong since the market peaked in 1997.
Most government land sales in recent years, including today’s auction, have been triggered by developers who promised to pay minimum amounts for sites on a list of available lots under the so-called land application system. Regular government land auctions have been partially resumed this year after they were halted in 2004 to support falling home prices.
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