Surveyors have cut their valuations of a residential land parcel for sale in one of Hong Kong’s upmarket suburbs, another sign of softening property prices in the world’s most expensive home market.
The site next to the Ho Man Tin subway station – with a gross floor area of 639,382 square feet (59,400 square metres), or the size of nine football fields – is estimated at HK$12.8 billion (US$1.63 billion), 10 per cent less than an earlier valuation, after the government scrapped a tender at the city’s exclusive The Peak enclave. Eight bids were submitted for the Ho Man Tin parcel, from 31 expressions of interest, when the tender closed on Monday, said MTR Corp, which operates the city’s subway and possesses the development right to the parcel.
“The housing market has been buffeted by headwinds recently,” said James Cheung, executive director at Centaline Surveyors, who had expected more than 10 bids for the Ho Man Tin parcel. “The tender of a luxury housing site on The Peak also flopped unexpectedly.”
Hong Kong’s property prices have taken a break from 28 consecutive months of gains through August, ever since a government proposal of a vacancy tax forced developers to add completed apartments to the housing stock. The city’s banks also ended a decade of low-interest mortgages, further dousing the urge of property speculators.
Hong Kong’s property prices may decline by between 5 and 10 per cent over the next 12 months, from their peak in the third quarter, according to a forecast by S&P Global Ratings. The city’s mortgage rates are expected to rise by up to 160 basis points by 2020 from current levels, which may cause home prices to plummet by 15 per cent, according to a September report by Goldman Sachs.
Even MTR, which is entitled to 25 per cent of the profit from selling property on the land parcel, is cutting its share by 10 percentage points, compared with the first phase on the same plot.
Ho Man Tin is located in the Kowloon peninsula across the Victoria Harbour from Hong Kong Island. It is an up-and-coming residential enclave, with prices quickly soaring beyond the reach of average first-time buyers.
Up to 1,000 apartments with a combined estimated investment cost of HK$21 billion, selling for an average of HK$33,000 per sq ft, can be built on the site by 2024, according to an estimate by Knight Frank.
The developers that did submit bids for the latest sale of government land included the biggest companies in the city: Sun Hung Kai Properties, Henderson Land Development, CK Asset Holdings, Chinachem Group, Kerry Properties, a venture of China Overseas Land with Investment and Sino Land, a venture of New World Development with Wheelock Properties, and one other unidentified company.
“The number of bidders was slightly lower than expected,” said Thomas Lam, executive director of Knight Frank, who had expected about a dozen bidders. “A lot of developers still have a number of projects on sale, so they are not in a hurry to buy land under the current sentiment.”
That has not deterred Wheelock, which has sold almost every apartment in its One Ho Man Tin development nearby.
“We know the market here,” said the developer’s managing director Ricky Wong.
Chinachem is also in the race to secure the Ho Man Tin site because the neighbourhood is equipped with “good amenities and daily convenience to a diversity of lifestyles,” said the developer’s chief executive Donald Choi.