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A March 12, 2018 drone’s view of the former Kai Tak Airport site, which has been broken up for sale by the Hong Kong government since 2013 to be turned into retail malls, hotels, luxury apartments and public amenities including a sports ground and a children’s hospital. Photo: SCMP/Roy Issa
PropertyHong Kong & China

Hong Kong sells third housing plot on disused airport runway at 12.7 per cent discount, in another sign of property market woes

  • Kai Tak Area 4B Site 2 sold to a unit of China Overseas Land & Investment for HK$8.03 billion, or HK$13,523 per square foot
  • The latest price tag is a 12.7 per cent discount to the previous plot sold in November, in another clear sign that Hong Kong’s property market has cooled
Hong Kong property
Pearl Liu
Pearl Liu
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Hong Kong’s government, which relies on land sales for a substantial part of its revenue, has sold its final residential plot for the year at a 12.7 per cent discount to market valuation, in a further sign of the city’s cooling property market.

Kai Tak Area 4B Site 2, the third plot for sale on the former airport’s disused runway, sold for HK$8.03 billion (US$1.03 billion) to a unit of China Overseas Land & Investment, according to an announcement by the Lands Department. Six bids were submitted for the tender, which closed last Friday.

SCMP Graphics
The price tag for the site, with an area of 97,393 square feet (9,048 square metres) and a plot ratio of six times, translates to HK$13,523 per square foot, 12.7 per cent lower than an adjoining parcel that sold on November 14. Up to 594,087 square feet of gross floor area can be built on the site in Kowloon East, overlooking Victoria Harbour.

Market observers saw the low price as a sign developers are worried that Hong Kong’s stalling housing market will dip further in 2019.

“The price is a bit disappointing,” said James Cheung, executive director of Centaline Surveyors, who had previously valued the parcel of land at HK$15,500 per square foot. “Developers are not as aggressive as they were earlier in the year because the market has softened.”

Thomas Lam, an executive director at Knight Frank, said builders were worried they might have to offer their completed units at lower prices in the coming year.

“Also the potential for increasing interest rates in the city will push up their costs,” he added.

Lam expects the flats on the latest plot will be sold for HK$28,000 per square foot to cover the investment of China Overseas Land & Investment, the first developer to win a plot in Kai Tak, back in 2013.

As recently as two years ago, land prices at Hong Kong’s former airport were spiralling upwards, as a decade of cheap loans and inbound Chinese capital lured developers like HNA to outbid each other with ever higher prices for land they can turn into shopping malls, hotels and luxury apartments.
But Hong Kong’s property market had turned for the worse since August, after Hong Kong’s Chief Executive Carrie Lam Cheng Yuet-ngor introduced a vacancy tax to force developers to add to the city’s housing supply, while banks began raising mortgage rates for the first time in 12 years.

Centa-City Leading Index, the home price index compiled by Centaline Property Agency, has fallen 6.4 per cent for 12 weeks for the week ended December 16, the longest losing streak since November 2008.

On November 7, a consortium comprising Wheelock Properties, New World Development, Henderson Land Development and Empire Development paid HK$8.33 billion, or HK$14,500 per sq ft, for Kai Tak’s first residential site. That was already an 18 per cent discount to the HK$17,776 per sq ft price that Sun Hung Kai Properties paid in May.

Still, 19 residential plots, including eight in Kai Tak area, remain unsold in the Hong Kong government’s land sale plan ended March 31, 2019.

Analysts will be looking at the Kai Tak Area 4C Site 3, which enjoys a full sea view, to test the market.

The plot, which could yield a gross floor area of 648,617 square feet, is up for sale and the tender will close on January 18, 2019.

“A plot like that is rare in the city because the future development there will be right in front of Victoria Harbour. Developers are expected to compete for the site, shrugging off the soured sentiment,” said Lam. “If fewer bids come in or a lower-than-expected price is seen, that would signal that they are losing confidence.”

This article appeared in the South China Morning Post print edition as: Kai Tak residential site sells for 12.7pc below market valuation
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