Hong Kong land sale at former Kowloon airport receives muted response from developers

Sandy Li

The biggest housing site on offer at Hong Kong’s former Kai Tak airport received a cold shoulder on Friday as property developers took a more cautious stance on the local property market following recent downgrades to the city’s economic outlook.

The plot designated Area 4A Site 1, located on the former runway with a gross floor area of 1.08 million square feet, received just four bids, according to the Lands Department.

Property analysts said they had expected the site to attract from five to seven bids, and that Friday’s result could be the weakest turnout in the six years since the government started selling the former airport land to developers.

“It should be the worst response in Kai Tak area since the government offered the first lot for tender in 2013,” said Vincent Cheung, managing director of Vincorn Consulting and Appraisal.

“Some developers prefer giving up as this large site could involve total investment of more than HK$20 billion (US$2.56 billion). It may not be worth taking on such a high-risk investment at a time when the environment is surrounded by uncertainties.”

The bidding parties included CK Asset Holdings, Sun Hung Kai Properties, a consortium comprised of Wheelock Properties, K Wah International and China Overseas Land & Investment and another alliance formed by Sino Land.

As part of the tender, developers are required to incorporate facilities for a residential care home for the elderly and a childcare centre into their residential development plans.

The site is valued at HK$13 billion to HK$16.1 billion, or HK$12,083 to HK$15,000 per square foot.

The response comes a day after Standard Chartered, one of Hong Kong’s three currency-issuing banks, lowered its economic growth forecast for the city to 1.4 per cent this year, from 2.2 per cent.

Standard Chartered cuts Hong Kong’s growth prospects through 2021 as US-China trade war puts the squeeze on city’s economy

On Tuesday, HSBC revised down its estimated growth of mainland tourist arrivals for the year to 9 per cent from 9.7 per cent as the ongoing protest against the now-suspended extradition bill could put visitors off travelling to the city this year.

The Centa-City Leading Index, a home price gauge compiled by Centaline Property Agency, showed prices for lived-in homes dropped 0.8 per cent to 188.94 after hitting a record 190.48 for the week ended June 30. Still, home prices have risen 9.8 per cent since January.

“The response is a bit of a disappointment,” said Thomas Lam, executive director at Knight Frank.

“Taking into account the recent social movement and the trade tensions between the US and China, developers are unlikely to submit aggressive bids for the site.”

Kai Tak development. Credit: SCMP

As a result of the deteriorating outlook, Lam said the value of the site should be revised down by 10 per cent to a range of HK$15.1 billion to HK$16.2 billion, or HK$14,000 to HK$15,000 per square foot.

Hong Kong protests will put off 350,000 mainland Chinese tourists this year, HSBC estimates

Alvin Lam, director of Midland Surveyors believes the site would fetch HK$14.5 billion, or HK$13,500 per square foot, reflecting the lower end of market expectations.

“Given the site has a limited sea view and the large capital commitment, developers will be cautious in their spending,” he said.

In March, a consortium of five developers won the adjacent residential site, Area 4B Site 1, for HK$9.89 billion, or HK$13,701 per square foot. The successful bid was comprised of Wheelock Properties, Henderson Land Development, New World Development and China Overseas Land & Investment.

But K Wah International remained upbeat about the market outlook.

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