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Old February 22nd, 2010, 06:50 PM   #1
hkskyline
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HONG KONG | Tseung Kwan O Area 66B | 100m (max) | Pro

Sun Hung Kai Pays US$434 Mln For HK Site; Above Expectations
22 February 2010







HONG KONG (Dow Jones)--Developer Sun Hung Kai Properties Ltd. (0016.HK) paid a higher-than-expected price for a site in a Hong Kong land auction Monday, fueling expectations the government may soon step in to cool the city's sizzling property market.

Sun Hung Kai secured the residential site in the New Territories with a bid of HK$3.37 billion (US$433.9 million), above the average HK$2.81 billion forecast of six surveyors and analysts polled earlier by Dow Jones Newswires, and 69% higher than the reserve price of HK$2.0 billion.

The result of the auction suggests Hong Kong's overall home prices are set to rise further after their near 30% increase last year, supported by an influx of foreign funds, ultra-low interest rates and a recovering domestic economy. While some developers and property analysts say the market isn't yet overvalued, others caution a bubble may be forming and are urging the government to take preventative measures. Property prices are now higher than they were before the onset of the global financial crisis in late 2008.

Sun Hung Kai, Hong Kong's biggest developer with a market capitalization of around US$34 billion, won an intense bidding battle with Nan Fung Group to secure the 12,300-square meter site in Tseung Kwan O, where it already has five large-scale residential developments, including Central Heights, Park Central and Ocean Shores. The winning bid translates to HK$4,628 a square foot.

Victor Lui, executive director of Sun Hung Kai's real-estate agency unit, told reporters the company plans to invest HK$6.50 billion to develop the site, which has a maximum gross floor area of 67,650 square meters.

Sun Hung Kai's auction success Monday came after it raised HK$4.2 billion over the weekend from the sale of 900 flats at Yoho Midtown, a mass-residential project in Yuen Long, in New Territories West. The developer sold the units at an average HK$5,400 a square foot, a steep premium to other apartments in the area, indicating the mass residential market could be vulnerable to the speculation that led to a jump of around 50% in luxury apartment prices last year.

Donald Choy, a director at Nan Fung, told reporters the winning bid for the Tseung Kwan O site was reasonable and showed the Hong Kong property market is still in good shape.

Victor Li, managing director of developer Cheung Kong Holdings Ltd. (0001.HK) and who was at the auction, also said the price was reasonable.

But some other market insiders voiced concern.

"The hype seen in the luxury home market appears to have spilled over to the mid-to-lower end market," said Tony Chan, chief operating officer at Century 21 Surveyors Ltd. "I think the government should increase land supply or raise stamp duty."

Keith Yeung, an analyst at Mirae Asset Research, said: "The government is now under tremendous pressure to intervene in the Hong Kong residential market. Policy adjustments could be announced as early as Wednesday." That is the day Financial Secretary John Tsang delivers the government's budget for the fiscal year ending March 2011.

The Hong Kong government has said it will monitor the property market and fine-tune its land sales policies if necessary. A person familiar with the situation said Friday that Hong Kong's financial secretary will announce plans in his budget speech Wednesday to raise the stamp duty on luxury property transactions in the latest effort to restrain the property market.

The move would follow the Hong Kong Monetary Authority telling banks late last year to raise the standard downpayment ratio on luxury properties to 40% from 30%.
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Old August 16th, 2010, 05:52 PM   #2
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SHKP gains leverage to bolster flat prices
High land cost to benefit two developments

1 March 2010
South China Morning Post

Sun Hung Kai Properties' decision to pay a steep price for a residential site in Tseung Kwan O is a move to take advantage of its development across the street and use the high land cost to price the flats there at a large premium, market watchers say.

Last Monday, SHKP paid HK$3.37 billion or HK$4,628 per square foot for a plot at Area 66B in Tseung Kwan O. It was a remarkably high price, considering the per-square-foot price for the land alone was higher than prices of finished units at neighbouring projects, which are currently changing hands at HK$4,000 to HK$4,500 per square foot in the secondary market.

The outcome was described by industry practitioners as "the flour costing more than bread".

Pang said the developer could price the units in Area 56 at HK$6,000 to HK$7,000 per square foot.

"SHKP always will command a big premium over the [average price in] the secondary market, considering its high quality," he said.

The firm has raised more than HK$4.2 billion from the sale of 1,100 units at Yoho Midtown in Yuen Long at an average price of HK$5,400 per square foot. One 1,378 sq ft unit sold for HK$16.26 million or HK$11,800 per square foot, a record in terms of price per square foot of gross floor area in the vicinity.

David Ng, head of property research at Royal Bank of Scotland, believes the co-development of the two projects could provide synergies both in terms of cost reduction and charging a higher selling price.

He said SHKP bought the site at Area 56 in February 2007 at HK$3.34 billion, giving a land cost of HK$1,885 per square foot.

Ng estimated the land cost of Area 66B would be reduced to HK$4,073 per square foot if SHKP managed to secure a bonus 15 per cent gross floor area. By including ancillary areas such as bay windows and balconies in the calculation of gross floor area, the developer could gain as much as 30 per cent more saleable space. Without the bonus floor area, Area 66B will provide a gross floor of 728,184 sq ft.

The average land cost - including the bonus floor area - of the two development sites together would work out to HK$2,979 per square foot, even though SHKP paid a jaw-dropping price for Area 66B last week.
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