Greater China News
Published December 20, 2006

Peak site sold for HK$42,149 per square foot

Sun Hung Kai Properties confirms buying 0.74 hectare residential site

(HONG KONG) Hong Kong's government sold a 0.74 hectare residential property on the Peak overlooking the city for a price that was above analysts' estimates and a per-square-foot record for the city.

View from the top: The record price reflects the high cost of Hong Kong's luxury homes, which are among the world's most expensive

The Mount Kellett Road site is in one of Hong Kong's most expensive residential districts.

The buyer was not identified at the sale, the government's fourth for the year.

But a Sun Hung Kai Properties spokeswoman confirmed it bought the site, sending the company's shares down 2 per cent.

The HK$1.8 billion (S$357.1 million) price is equal to HK$42,149 a sq ft for the land able to be developed on the site, according to Bloomberg calculations. That is more than double the previous record from January 1997 of HK$18,357 a sq ft, Hong Kong property companies said.

The result may push up the price of Hong Kong's luxury homes, already among the world's most expensive.

Manhattan homes - on Fifth Avenue, Park Avenue and Madison Avenue near Central Park - cost about US$1,870 a square foot. In London's Chelsea district, prices average US$2,244, according to CB Richard Ellis Inc, the world's largest real estate adviser.

'The outcome and the atmosphere at the bidding showed developers are extremely bullish on the luxury residential market,' said Ken Yeung, an analyst at BOCI Securities Ltd in Hong Kong. 'That's probably because of the lack of supply.'

The price was higher than the median estimate of HK$1.19 billion of five analysts surveyed by Bloomberg News. It was 134 per cent more than the opening bid.

The government is one of Hong Kong's largest suppliers of unoccupied land for building. Real estate developers trigger auctions from a list of sites by promising minimum amounts: HK$768 million for yesterday's auction.

Sino Land Co paid a higher-than-expected price for another luxury residential site at last month's auction.

The previous per-square-foot record was in January 1997, when Eton Properties Ltd, a privately owned local developer, paid HK$230 million for a residential site in Repulse Bay, according to property companies Jones Lang LaSalle and Midland Holdings Ltd.

'As long as prices keep going up, they can easily sell at HK$50,000 per sq ft,' said BOCI's Mr Yeung. 'And at that price, they should be able to make a profit.'

Residential prices may jump more than 50 per cent by the end of next year on rising consumer confidence and speculation that interest rates won't rise, UBS AG analyst Eric Wong said in a report last month.

Land sales, conducted by the city's government several times a year, serve as a barometer of economic health for the property-mad territory. It sold two sites for mixed results in the last auction in November, fetching a combined HK$5.18 billion for the government's coffer.

Sun Hung Hai shares dropped 2.2 per cent to HK$87.35 in afternoon trading in Hong Kong. - Bloomberg, Reuters