Tung Chung land sells below govt price
Updated: 2010-05-12 07:38
By Oswald Chen(HK Edition)
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Donald Choi (2nd left), managing director of Nan Fung Development, makes a bid during the first Hong Kong land auction in this fiscal year Tuesday. The government sold a site in the city's Tung Chung area to the company for HK$3.42 billion ($440 million), almost a third less than previous estimates. Jerome Favre / Bloomberg News |
Nan Fung gets parcel for HK$3.47 b in sluggish auction with few bids
The market sentiment of this fiscal year's first land auction was much less enthusiastic than expected, as the bid price offered for the most recent tract open to bids, a Tung Chung land parcel, amounted to only HK$3.42 billion, 18.6 percent less than the lower end of the market valuation figure. This bid price was just 19 percent higher than the auction upset price.
Enthusiasm during the auction was hardly unbridled, as the auctioneer threatened 11 times that the land parcel would be withdrawn from bidding if the bid price did not reach the government valuation figure.
Only three property developers entered their bids during the auction, which registered a total of only 16 bids during the entire auction. Nan Fung Development Ltd, which successfully grabbed the tract, dominated the bidding, while most other developers remained on the sidelines.
The Lands Department Deputy Director GM Ross, who held the auction Tuesday, said that the bid price is the market price, reflecting the current market expectations toward the future development of the local property market.
Designated as Area 55B, Tung Chung (TCTL 37), the parcel has a total site area amounting to 282,017 square feet. Hence, the HK$3.42 billion bid price translates into an accommodation value of HK$2,377 per square foot of finished gross floor area. Previous market estimates of this land parcel's valuation ranged from HK$4.202 billion to HK$5.465 billion. The auction upset price was set at HK$2.876 billion.
Nan Fung's Managing Director Donald Tsoi said that it will incur costs of approximately HK$6.42 billion in total for developing this residential project in Tung Chung. The Group will undertake this construction project on its own, and expects it will build 1000 to 2000 flats.
Choi emphasized that the bid price is reasonable, as the Group is making the bids prudently and with regard for the market situation. With the local unemployment rate falling and the mainland economy growing, the local property market will benefit from these developments, Choi said.
Property developers emphasized that the cheerless atmosphere during the auction does not mean that the developers are angry with the recent governmental measures aiming to curb property prices. Tuesday's land auction was the first one since the administration announced a series of measures to tackle local soaring property prices in April.
"How can property developers be discontent with the governmental measures?" New World Development Executive Director Leung Chi Kin responded when asked.
"There is a discrepancy of expectations between government and the market concerning the valuation of the Tung Chung site," Cheung Kong (Holding) Executive Director Woo Chia Ching said.
Property valuation analysts said that the land auction result will exert immediate negative effects on the Tung Chung property market as house prices and transaction volumes in the secondary market will be lower due to unfavorable market sentiments.
However, for the property market in the city as a whole, the prospect is, for the short term, not so pessimistic, analysts suggested.
"There will be three more land auctions in the coming months. If property developers are still not active in bidding for the lands, then it will send the market signal that the local property market is really going to slow down," Centaline Surveyors Managing Director Victor Lai told China Daily.
China Daily
(HK Edition 05/12/2010 page2)