Cheaper land in Hong Kong: what low-price parcel sales mean to buyers, renters, developers and government coffers
- Developers are the only players likely to benefit from sales such as one in Mong Kok on March 1 that fetched 35 per cent less than a pessimistic estimate
- The low-water mark for the slab of prime commercial real estate could have an adverse impact on government land revenue, analysts say
The recent sale of a parcel of prime commercial land in Mong Kok for 61 per cent less than the HK$12 billion (US$1.53 billion) some thought it might be worth is likely to mean a more handsome margin for Sun Hung Kai Properties (SHKP), rather than any profound change to the city’s real estate fundamentals, according to analysts.
SHKP prevailed over two other bidders to secure the 124,184 sq ft plot on March 1, winning the right to develop and lease the land for 50 years for HK$4.73 billion. That price is 35 per cent below the HK$7.3 million that property consultant Colliers estimated as the low end of the land’s value, and 61 per cent below the HK$12 billion it cited as the high end of the range.
Market observers were left to wonder whether the lower-than-expected bid indicates that lower rents or selling prices lie ahead in the property market, as well as what the transaction says about future government land sales.
The deal is “very good for SHKP”, said Raymond Cheng, managing director and head of China/Hong Kong research and property at CGS-CIMB Securities.
“The winning bid could be considered surprisingly low,” Cheng said. “It was a reflection of the current state of the market, particularly the office and retail segments. We expect office property prices to drop by 5 to 10 per cent year on year for 2023.”
