Sun Hung Kai Properties Ltd (新鴻基地產), the world’s biggest developer by market value, won Hong Kong’s first land auction of the year with a bid that exceeded most analysts’ estimates after selling 900 homes over the weekend as demand for property in the city surges.
The shares closed 2 percent higher after the developer paid HK$3.37 billion (US$434 million) for the site in the eastern Tseung Kwan O district. The company raised HK$4.2 billion in a weekend apartment sale that attracted 120,000 prospective buyers.
The land auction and the weekend sale fanned speculation a bubble is forming in Hong Kong’s housing market, where home prices surged 29 percent last year as low interest rates and an increase in buying by mainland Chinese stoked demand.
Sun Hung Kai paid a “reasonable” price for the site, Victor Lui (雷霆), executive director of Sun Hung Kai’s real estate broker, said by telephone. The price paid was “higher than expected but reasonable,” he said, adding he was “positive” about the outlook for the property market.
Sun Hung Kai plans to invest HK$6.5 billion on the plot of land in a medium-sized residential project, which may take between three and four years to complete, Lui said.
The developer at the weekend sold 900 apartments at the Yoho Midtown apartment complex in northwestern Yuen Long district for an average HK$5,400 per square foot. That compares with an average HK$3,000 per square foot for new homes in the area a year ago, Centaline Property Agency Ltd said.
About 40 units were immediately advertised for resale at asking prices of as much as 20 percent more than the original costs of purchase, the South China Morning Post newspaper reported, citing property agents.
“All the ingredients are in place for a property bubble in Hong Kong, including low interest rates and limited supply, but I don’t think we are in one yet,” said Buggle Lau, chief property analyst at Midland Holdings Ltd (美聯集團). “If more speculators enter the market then it could push prices up too high.”
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