HK land parcel sells for cheaper than expected

Hong Kong

HONG Kong's government sold a large residential plot at a cheaper price than analysts expected as developers turn cautious amid a worsening economy.

The Kowloon plot, about four times the size of a football field, went to a unit of CK Asset Holdings for HK$4.95 billion (S$905.1 million), 10 per cent less than even the lowest of analyst valuations.

Last week, the government failed to sell another large site in Kai Tak because bids did not meet its reserve. Although property prices in Hong Kong, the world's most expensive city for real estate, have held up relatively well this year, declining just 1.2 per cent since January, optimism is being eroded as pro-democracy protests resumed and the economy struggles to recover from the coronavirus outbreak.

Hong Kong's economy had its worst slump on record in the first quarter, with key industries including tourism and retail bearing the brunt. The city's unemployment rate rose to the highest in a decade in April, posing risks to the property market as people lose their ability to repay mortgages.

The site that sold on Tuesday evening was valued at HK$5.5-6.5 billion by Knight Frank ahead of the tender. The property services firm had already lowered that valuation by 20 per cent from June last year.

It also came with stringent requirements. As part of its development, at least 1,000 apartments will have to be built and sold to Hong Kong permanent residents at a 20 per cent discount to market rates as part of the government's programme to promote home ownership.

Other developers that submitted bids included Wheelock Properties, Sino Land and China Overseas Land & Investment. BLOOMBERG