CK Asset Holdings, Hong Kong's second-largest developer by value, has acquired the city's first-ever parcel of land meant for both private and subsidized homes developed by a private company. Apart from the unique appropriation, the biggest news is the low price that was paid for the land, which was significantly lower than current market values.
The city's Land s Department revealed on Tuesday that CK Asset Holdings had acquired the parcel of land on Kwun Tong's Anderson Road for just HK$4.95 billion or roughly around $638.8 million. The price equates to about HK$4,546 per square foot, which is just a fraction of the HK$12,003 per square foot another developer had paid for a nearby parcel of the property back in 2018.
Centaline Surveyors noted that the sale at the low end of market expectations is a clear indication of the gloomy prospects in the city's housing market. The particular parcel of land was initially valued at a range of HK$4.6 billion to HK$9 billion. However, due to the recent economic disruptions caused by the months of protests and the recent spread of the coronavirus pandemic, appraisers have cut their value estimates by an average of about 20 percent.
Appraisers at Midland Surveyors stated that the government may have taken into consideration the city's bleak economic outlook and priced the land appropriately, resulting in the acquisition at that price. The land CK Asset had purchased is capable of yielding an estimated 1.09 million square feet of usable space. However, the company would likely still need to spend between HK$9 billion to HK$10 billion to develop the property.
CK Asset was able to win the bid for the property against 9 other bidders. The other developers that had bid for the lot included Wheelock Properties, Sino Land, K Wah International, Talent Power Holdings, Grand Ming Group, China Overseas Land and Investment, Chinachem Group, and a consortium of three Chinese developers.
Due to its appropriation as a private and government-subsidized residential property, the company will have to sell at least 1,000 flats as starter homes. These flats will need to be priced at 80 percent of their actual market value and will have to be sold before any of the project's private homes can be sold to the public.
This condition will further cut into the project's profit margins and investment timeline. CK Asset also runs the risk of incurring additional interest payments for the project as none of the starter homes can be sold until the project is completed. The developer may also face other challenges, which includes becoming subject to a vacancy tax on empty.
The acquisition of the land comes just days after Hong Kong officially withdrew its sale of a commercial plot of land at Kai Tak, which was previously the site of the city's international airport. The city was forced to withdraw the sale due to a lack of interest from developers, whose bids were not able to hit the property's reserve pricing.