The auctioneer invites bids during an auction for a residential parcel in the city's Tseung Kwan O district sold by the Hong Kong government yesterday. Sun Hung Kai Properties won the bid for HK$3.37 billion, exceeding the low end of analysts' estimates. CNS

Winning bid of HK$3.37b beats base price and analyst estimates

HONG KONG: Sun Hung Kai Properties, the biggest property developer in Hong Kong, yesterday made the winning bid, in Hong Kong's first land auction of the year, for a residential site in Tseung Kwan O with its offer of HK$3.37 billion, exceeding market forecasts.

The price tag for the Tseung Kwan O site was around 69 percent above the government's base price of HK$2.0 billion, while the market earlier expected the plot to fetch up to around HK$2.9 billion.

Average price per square foot of finished floor area of the site will be around HK$4,628, assuming that the construction will provide a total gross floor area of 728,000 square feet.

Spurred by the auction results, shares in Sun Hung Kai finished up 2 percent, or HK$2.0, to close at HK$102.1.

Developers in Hong Kong yesterday showed keen interest in bidding for the Tseung Kwan O site. Within half an hour, the auction attracted participation from 11 bidders.

Sun Hung Kai eventually beat off challenges from rival developers Chinachem, Nam Fung and others to win on the 68th bid.

Victor Lui, executive director of Sun Hung Kai's real estate broker, told the media that the price paid was "reasonable", as the site is located at the center of the district.

He said the company may spend around HK$6.5 billion to develop the site into medium-sized residential blocks.

The newly-bid land site, meanwhile, is situated on the same block of a 1,028-apartment complex that is also being developed by Sun Hung Kai.

Deputy Director of the Lands Department Graham Ross said the market has shown strong interest in the Tseung Wan O site, while the auction is very likely the last one of this financial year ended in March.

"We are very satisfied with the conduct of the auction and the price that we obtained," Ross told reporters yesterday.

He added that the government will add and remove sites from the application list from time to time, while the new application list will be reviewed within the next two months.

Wong Leung-sing, associate director for research at Centaline Property Agency, said the auction price is reasonable, while it also reflects the fact that developers are quite optimistic about the city's property market.

"The price paid is not very high, as the HK$2 billion base price was a little bit undervalued," Wong said.

Yu Kam-hung, CB Richard Ellis's senior managing director of valuation & advisory services of Greater China, said the completed apartment units can be sold at around HK$6,500 per square foot after construction.

New homes in Tsang Kwan O district are now selling at around HK$5,000 per square foot.

Midland Holdings executive director Vincent Chan said home prices in Tsang Kwan O may encounter a single-digit jump in coming weeks, since the residential supply in the district is not adequate.

"However, home prices will not surge too high, as it may inhibit purchases from potential buyers," Chan added.

He expects residential property prices in the city to rise 10 to 15 percent in 2010; however, the price jump will not be as rapid as that in 2009, he said.

(HK Edition 02/23/2010 page2)