The HK$10.9 billion (S$1.98 billion) sale of a residential site in a public auction conducted by the Hong Kong government has surpassed several estimates and indicated that home demand is withstanding efforts to cool down the property market.
Potential home buyers should take into consideration their ability to pay before taking out home loans, according to Secretary John Tsang, in an effort to prevent a bubble formation.
"Citizens should consider the affordability before buying houses," said Mr. Tsang.
Sun Hung Kai Properties Ltd, the world’s largest property developer by market value, won the bid for the Ho Man Tin district site, estimated to be around HK$8.41 billion.
According to Centaline Property Agency Ltd, the highest price paid in a government auction in Hong Kong since its market peak in 1997 is at HK$12,540 psf.
Home prices have increased 41 percent since end-2008, which prompted the government to tighten down payment requirements for luxury homes in October in order to curtail speculation following record low interest rates. On May 12, Mr. Tsang pledged to boost land supply.
"The above-expectations bidding price shows that the developers hold a positive outlook on urban sites for luxury homes, as currently it is obvious the supply for luxury homes is not sufficient," said Wong Leung Sing, Centaline’s associate director for research.
Last week, the Centa-City Index dipped 1.44 percent, its biggest drop in over 18 months.
Mr. Tsang said as many as 60,000 home units will be added in Hong Kong in three to four years.
A spokeswoman for Sun Hun Kai said the price "was not cheap but still reasonable" after the auction. The firm expects to invest HK$18 billion to develop the residential site "into a luxurious residential area." The estimates ranged between HK$7.15 billion and HK$9.8 billion.