The tender for the only residential plot of land available in Hong Kong in the current quarter has received an icy response of just one bid and is expected to be withdrawn, as high interest rates and undigested supply in the neighbouring area deter developers.
Sino Land was the sole bidder for the parcel on Lantau Island as of Friday, the last day of the tender, according to the Lands Department.
The site is a 1.9-hectare parcel in Cheung Sha, which is expected to yield 110 housing units, accommodating low-rise and low-density town houses, according to surveyors. The land was valued at about HK$245 million (US$31 million) based on a gross floor area of 81,666 sq ft, which translates to HK$3,000 per square foot, according to Midland Surveyors.
The lukewarm response continues a dismal year for government land sales in the city. As of November, sales have only achieved 14.2 per cent of the current financial year’s land premium revenue target of HK$85 billion, and six sites have been withdrawn after receiving no bids or insufficient bids, according to JLL.
James Cheung, executive director at Centaline Surveyors, said the firm will further lower its valuation of the site from an initial estimate of about HK$490 million to HK$327 million, which translates to HK$4,000 per square foot. The company expects that the tender will be withdrawn.
The lack of developer interest came as no surprise, according to Alex Leung, senior director at CHFT Advisory and Appraisal, who cited high interest rates and lack of demand for holiday houses.
Government land sales in this area received a good response between 2017 and 2019. In the last tender in 2019, for example, there were nine bids, mostly from second-tier developers, Leung said.
“The demand for houses in this remote area is weak,” he said. “Among the government lands granted in 2017 to 2019, there is a coming supply of over 30 houses that has not yet been absorbed by the market. It seems to me that the government is also not confident that low-density development lands in this area could be sold at a good price.”
“Cheung Sha is a remote location traditionally targeting holiday homeowners and expats,” said Hannah Jeong, head of valuation and advisory services at Colliers Hong Kong. “The site is also located on a slope, requiring higher infrastructure costs.”
Hong Kong’s Ma Tau Wai project awarded to Sino Land after US$272 million bid
Hong Kong’s Ma Tau Wai project awarded to Sino Land after US$272 million bid
Alvin Lam, director at Midland Surveyors, echoed the view about the moderate response and said developers with previous development experience in the district will be more interested in the project.
Based on the government’s land sale plan for the financial year, three sites are yet to be released to the market, including commercial plots in Wan Chai and Admiralty and an industrial parcel in Yuen Long.
High interest rates and weak home sales are making developers conservative in their bids, which could lead to more withdrawals in the coming months. In turn, withdrawals will significantly reduce land revenue, funding for future infrastructure development and market sentiment, said Alkan Au, senior director of value and Risk Advisory at JLL.