The Hong Kong government sold a land parcel yesterday at a surprisingly low price, as property developers were less keen on the site because of its location and uncertainties over whether more tightening policies will be announced by the government.
It is the first auction following Hong Kong Chief Executive Donald Tsang’s announcement of property cooling measures in October, which includes restricting immigration based on property investments and raising housing supply.
The developers’ weak response was contrary to earlier auctions this year, when tranches of land fetched higher-than-expected prices following fierce rounds of bidding.
“It’s the location because there is one side facing a cemetery and the other side facing a secondary school, which means that it will be too noisy for the residents,“ said Yu Kam-hung, senior managing director for valuation in greater China at CB Richard Ellis (CBRE).
“One more uncertainty is that because there is a new policy about building plans,” said Mr. Yu.
Earlier this year, the government also announced measures requiring developers to submit building plans wherein the gross floor area (GFA) concessions would have to be cut to 10 percent from 20 percent, generating a higher net floor area.
Hong Kong developers usually quote apartment prices in GFA including the actual space of the apartment and other common areas like club houses and corridors.
“The new rules have some impact (on the auction result),” said Ng Shun-mo, sales director of unlisted HK-based developer Chinachem.
The project will involve HK$3 billion in investment, with four 10-storey blocks due to be constructed on the site yielding 160 units, said Chinachem.
The government sold the Kowloon Tong site with an area of 75,845 sq ft and GFA of 227,529 sq ft at HK$2.17 billion, below the poll estimate of HK$2.78 billion.