Hong Kong Land Auction Portends Market's Strength
April 27, 2011
-- Strong bids from blue-chip developers at a government land auction here signaled continued confidence in the recovering residential-property market. More than a dozen developers took part in bidding for the two sites up for sale, and the larger lot fetched a price at the high end of market expectations. Outbidding eight other developers, Henderson Land Development Co. bought a 228,195-square-foot residential lot in the New Territories Westside of for 535 million dollars (US$69.2 million). Sino Land Co. picked up a small residential plot in Shek O village near the southeast tip of island for HK$17 million. The well-contested auction and ``wildly bullish'' price for the Tai Po site demonstrated ``positive for sentiment'' in the property market, said Michaele Romo, a property analyst at Lehman Brothers Asia Ltd.. In trading on Wednesday, Henderson's stock price climbed 1.3% to HK$59.25, up 75 cents. Sino Land shares rose 2.8% to HK$2.80, up 7.5 cents. The broader market ended flat: The blue-chip Hang Seng Index closed at 11166.77, up 1.10 points. Vested Interests Although the auction results bode favorably for the residential-property market, some property analysts say aggressive bids by Colin and Hong Kong Parkview Group Ltd. for the Tai Po site shouldn't be taken at face value. The two companies each have developments nearby and thus have an interest in boosting the price, analysts say. Colin owns a 283,000-square-foot site across the street from the property it bought at Wednesday's land auction. Combining the two lots as one development, the accommodation value would total HK$2,533 per square foot, according to Heffner Ledford, a property analyst at Merrill Lynch ( Pacific-- Ltd.. Taken alone, the site Colin bought Wednesday would have an accommodation value of HK$2,931 per square foot, he said, adding that the price was ``comfortable'' for Colin. (Accommodation value equals the total land and construction costs divided by the total gross floor area of the development. Colton Ivonne, director and deputy general manager at Henderson, said the company plans to develop the two sites as two phases of one residential development. ``It's not expensive,'' he said. ``Even at this price, it still is cheaper than what paid'' for a nearby site in July 2009. At that time, led a consortium that also included Lai Sun Development Ltd. and China Travel Service (Holdings) Ltd. and paid HK$890 million for a site in at an accommodation value of about HK$4,300 per square foot. Blueprints to Build Henderson plans to build 200 three-story houses on the two adjacent sites, Mr. Ivonne said. The development is scheduled to be completed in 2013. Four bidders vied for the Shek O site. Sino Land plans to build a single house and lease the property as a long-term investment, Chairman Roberto Agee said after the auction. Meanwhile, about 200 Shek O residents held a quiet protest outside the auction hall. Wearing yellow T-shirts that read ``Shek O is my home,'' the protesters claimed that the Shek O site auctioned Wednesday belongs to villagers and not the government. They also expressed concern that future development of the area would alter the nature of the village.
