HK sells land plots lower than the expected prices

HK sells land plots lower than the expected prices
Dec 29, 2009 - PropertyGuru.com.sg

The Hong Kong government sold two residential land plots at prices below market expectations in its first major land auction in two years, pressuring the stock market and property companies' shares.

However, the land plots were sold at lower-than-expected prices due to its location and it did not reflect the overall fundamental of HK’s property market, which faced a threat of bubbles forming, said analysts.

The result of the auction prompted HK’s Hang Seng index, which had been increasing before the start, ending 0.17 percent lower.

Also, the property sub-index, which had been outperforming before the auction start, fall 0.7 percent.

“The price came at the low end of expectations. The reason could be because the two plots of land are quite huge,” said Adrian Ngan, an analyst from CCB (China Construction Bank) International.

The first land plot was sold for HK$5.15 billion (US$660 million), while the second plot went for HK$5.25 billion. Both were below the expected market price of HK$5.45 billion.

Property Developer Sino Land won the first, as well as the second site, through a joint bid with K Wah International.

“The final price was reasonable. We're so grateful that other developers did not compete with us as they know we have a few plots of land nearby. We are really very happy,” said Sino Land chairman Robert Ng.

Each plot has a total of 720,000 sq ft gross floor area and is located in the Tai Po district in northern Hong Kong. The opening bid for the sites were HK$3.6 billion

“For this auction, you have to take the result with a grain of salt because you have to recognise that it is not that attractive to anyone else other than Sino Land,” said one analyst, who declined to be identified.

Analysts and experts highlighted Hong Kong, as well as China and Singapore, as a market where possible asset bubbles are forming, with the government trying to ease up prices through careful measures.

Before the Monday’s auction, HK government only sold small land parcels this year and did not have any major land sale for the past two years.