Hong Kong Property: Nasty Surprise At Land Auction9 August, 2011, 15:20. Posted by Zarathustra
Tags: Hong Kong, Land Auction, Property, Real Estate
The Hong Kong government just sold a site in Shatin in a land auction, which gives a pretty nasty surprise.
The site in question was a residential site in Kau To of Shatin, which provides about 1,031,471 million sq. ft. of gross floor area. The interesting feature of this site is that the developers will have to develop at least 970 residential units. Given the fact that the area in question is dominated by detached houses, this will not be an usual development in that area.
Anyway, that’s no longer important, because we had a rather nasty surprise.
Developers were not particularly keen to bid even at the opening bid of HK$5.5 billion. After a minute or two of inaction, Kerry properties bided once. And then, no one bided. So we have probably the fastest land auction on record. The consortium of Sino Land, Kerry Properties and others won the site at the opening bid of HK$5.5 billion, implying an accommodation of HK$5,332 per square foot. That was way below even the lower-bound of market estimate, which was roughly HK$7 billion.
The hilariously nasty surprise came as the continued uncertainty of the global macro picture weighs sentiment in the property market. Of course, we have also seen a gradual drain in liquidity for the past few months, which has already led the increase in mortgage rates for multiple times as well as increase of deposits rates. The rather poor land auction result will most certainly make the sentiment even worse.
Of course, if the property market is proved to be resilient in 3-4 years time, this price tag for the site will prove to be a huge bargain.
I will have more on that later.