Major Hong Kong land sale may net up to HK$13b for two sites

Source : Business Times – 24 Dec 2009

The New Territories waterfront land will be auctioned on Monday

Cheung Kong (Holdings) Ltd, Sino Land Co and other Hong Kong builders seeking to replenish land reserves may pay up to HK$13 billion (S$2.4 billion) in next week’s government auction of two waterfront properties in the New Territories, analysts said.

Two residential parcels of the same size in the Tai Po district will be auctioned on Monday. Each covers 2.0925 hectares, the largest properties to be offered since September 2007, according to Lands Department records.

Hong Kong is trying to ease a shortage in land supply and homes that fuelled price increases of up to 30 per cent this year, sparking a public outcry over housing costs and prompting the central bank to warn the city may face ’sharp corrections’ in asset prices should fund flows reverse. Developers said the government, one of the largest suppliers of building sites, should offer more land.

‘If you are running very low on inventories and aren’t sure when the next site will be drawn, you’d want to seize on this auction and lock in the project,’ said Paul Louie, a Hong Kong-based analyst at Nomura Holdings Inc.

The two sites could fetch up to HK$6.5 billion each, said Alnwick Chan, executive director at Knight Frank LLP in Hong Kong. Two other analysts surveyed by Bloomberg estimated the combined price at HK$11.4 billion.

Sino Land Co, controlled by chairman Robert Ng’s family, is the front-runner to win Monday’s auctions since the developer already owns three sites nearby, Mr Louie said.

Joyce Yu, a spokeswoman at Sino Land, wasn’t immediately available for comment.

Henderson Land Development Co, controlled by Hong Kong’s third-richest man, Lee Shau-kee, is interested in bidding, company spokeswoman Bonnie Ngan said. New World Development Co and K Wah International Holdings Ltd also said they may participate in the auction, which was announced on Nov 18.

Developers trigger government auctions from a list of available sites by promising to pay a minimum amount. One bidder will likely buy both parcels to build luxury homes, said Alvin Lam, executive director of Midland Surveyors Ltd.

‘These are choice waterfront sites, and given the low-density requirements, it should draw many builders to auction for it,’ Mr Lam said. The sites each have a gross floor area of 720,757 square feet. Mr Lam forecasts both sites to be auctioned at HK$11 billion, or HK$7,631 a square foot. Mr Louie and James Cheung, director of Centaline Surveyors Ltd, estimated the land could fetch HK$11.4 billion.

Low mortgage costs, near-zero interest rates on savings deposits, and buying by mainland Chinese pushed up existing home prices by 28 per cent this year as of Dec 13, according to the Centa-City Leading Index, a weekly measure developed by Centaline Property Agency Ltd and the City University of Hong Kong.

Hong Kong developers have 50,000 units on hand to sell, based on estimates of their land bank, sites under construction and homes that were built, compared with 73,000 units in September 2007, Mr Louie said. The government sold a 22,126-square-metre site in Tai Po that month, according to Lands Department records.

Hong Kong home transactions almost tripled in November from a year earlier, figures from the Land Registry show, marking the eighth straight monthly gain.

The Hang Seng Property Index, which tracks the city’s six biggest developers, has risen 61 per cent this year, making it the best-performing component in the benchmark.