UPDATE 1-HK land auction tops forecasts, triggers bubble fears







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Wed Apr 27, 2011 4:56am EDT

* Resident site sold for HK$1.525 billion, beats forecasts
* Nan Fung, Wing Tai jointly win Hung Hom site
* Housing prices continue to rise beyond 1997 peaks (Adds analyst comments, details)
By Joy Leung
HONG KONG, April 27 (Reuters) - Hong Kong auctioned a plot of residential land in Kowloon on Wednesday at a price 20 percent higher than the average forecast, fuelling concern of a worsening bubble in the territory's sizzling property market.
The government sold the site in Hung Hom, southern Kowloon, for HK$1.525 billion ($196 million) to unlisted local developer Nan Fung Group and its Singapore-listed partner Wing Tai Holdings Ltd .
"The price is above consensus, but this is a small site and will be developed into big flats, which are scarce and should have good bargaining power," said Nicole Wong, a property analyst at CLSA.
"They have to sell at HK$15,000 per square foot for a meaningful margin," she added.
Nan Fung's managing director, Donald Choi, told reporters after the auction that the building cost for the project would be about HK$500 million to HK$600 million and the selling price for the finished apartments would be above HK$15,000 per sq ft.
The site, with gross floor area of about 153,500 sq ft, sold for 20 percent more than the average forecast of HK$1.27 billion from eight analysts polled by Reuters.
Hong Kong's housing prices have risen nearly 10 percent so far this year, continuing to climb beyond 1997 peaks. But analysts predicted the pace could slow during the rest of the year in response to government cooling measures and as banks gradually lift mortgage interest rates.
Earlier this month, the government said it would accelerate a plan to boost the land supply by releasing 12 sites in the coming quarter, adding that more cooling measures might be taken to stabilise the property market.
Sales volumes had slowed during the Easter holiday but home prices were still at high levels.
"I can't see any trigger for property prices to fall in the near term. Transaction costs are high now and people are likely to hold on rather than cut prices to push sales," Wong said.
She expect flat prices to rise for the rest of the year but at a decelerated rate. "They probably would increase 15 percent this year," she added. (Reporting by Joy Leung; Editing by Chris Lewis and Ken Wills)