Commercial land prices plunged by 50% in three months
Nov 24, 2022
Hong Kong
By Internet
  • City News
  • Property market
  • property
  • real estate market
The property market continues to decline, and land values are also declining.

The commercial site in Andersen, Kwun Tong, was awarded to "dark horse" SHKP for $296 million, with a floor area price of $2,684 per square foot, about 20% lower than the market's expected lower limit.


Compared with the adjoining commercial site won by Linklaters in August at $766 million with a floor price of about $5,501 per square foot, SHKP's winning bid fell by a staggering 51% in less than three months.


The reason why SHKP won the bid was considered "cold" by the market, all because the company did not have development projects in the region before, but the region has development projects of Cheung Kong and the Link, this time both unexpectedly lost.


The government has launched the second commercial land tender in Kwun Tong Anderson in recent months and closed the tender last Friday and received four bids from Cheung Kong, Linklaters, SHKP and Sino Land respectively.


The Lands Department announced yesterday that the project was won by SHKP with $296 million.


According to the information, the project covers an area of about 57,000 square feet, with a maximum buildable floor area of about 110,288 square feet, in other words, the winning bid is only $2,684 per square foot of floor area, which is about 20% lower than the previously expected lower price of $3,355 per square foot in the market.


The deputy managing director of SHKP, Mr. Lui Ting, responded yesterday that he was pleased to have won the site, and said that the area will be densely populated in the future, and will build a medium-grade shopping mall for people's livelihood, with an expected total investment of about $1 billion.


The project is SHKP's first development project in Anderson, separated into two parcels of land development, including the north of the thinner one with a floor area of about 5,000 square feet, and the other south of the larger site with a floor area of about 104,906 square feet.


Checking the information, Linkage had won the first commercial site in Anderson with $766 million in August, with a buildable floor area of about 139,200 square feet at a price of about $5,501 per square foot of floor area.


This time, the second commercial site in Anderson is relatively smaller in scale and located right next to the commercial site in Linklaters, but its land price is 51% lower than the purchase price of Linklaters in August.


What is more noteworthy is that both Linklaters and Cheung Kong are considered the "favorites" in this tender, both because Linklaters holds commercial projects in the region and Cheung Kong was awarded a first home car development project in 2020, but both sides did not win the tender in the end.


As the new land bid is the highest among the four bidding consortia, meaning that no matter what the bid of Cheung Kong and the Linkage will only be lower, the view of the future market can be considered quite conservative.


The construction cost of this period hinders the bid


The Managing Director of Hong Leong Consulting and Valuation, Mr. Zhang Qiaochu, said that after the site was awarded to Linklaters in August, the government announced the bids of the remaining four bids, and the second bid alone had dropped to $3,195, 42% lower than the price of Linklaters, so it is believed that the price of this land transaction better reflects the current market conditions and the value of commercial properties.


He continued to point out that commercial land prices than residential land prices fell more, in addition to supply and inventory, resulting in a much higher vacancy rate than residential, but also because of the investment in commercial properties to return to the capital period and reach a longer equilibrium of income related, coupled with commercial properties are less broken up for sale, disguised realization (cash flow back) time is longer, the risk is higher than residential development.


Midland surveyor director Lin Zibin said that the project land price is lower than expected by the market, mainly due to the impact of market adjustment, coupled with rising interest rates, increasing investment costs, so the number of bids has been slightly less than the first.


Moreover, the project is separated from the development of two plots of land, construction costs have increased, part of the parking spaces need to be used for public parking, but also make the developers more prudent bid.


Lam Tze-bin continued, the project is surrounded by the development of public housing complex, the area has a certain basic demand for retail and commercial livelihood, the developer is expected to use the project as a long-term investment.


In addition, although the project transaction price is lower than the market expectations, but at the same time, reflecting the government also with the market environment, the reserve price of the site to make adjustments, this move can avoid the project bid to hit the market, and to stabilize the supply of land as the goal.

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