Profit will depend on high flat prices, say agents
9 May 2007
Estate agents reckon the consortium that bagged the residential site at Yan Cheung Road in West Kowloon will have to sell flats for at least HK$8,000 per square foot to make a profit.
Midland Realty chief analyst Buggle Lau Ka-fai said that with accommodation value at HK$6,147 psf, break-even price would be about HK$7,000 psf.
``With a 20 percent margin, the selling price would be about HK$8,000 (psf),'' Lau said.
While the site may not compare with the location of the Waterfront at Kowloon Station for example, the projected selling price represents a 20 percent premium on secondary market prices in the area.
Although the site's final price of HK$4 billion was on the low end of market estimates, it was still a good outcome, Lau said.
He noted the site's accommodation value was about 14 percent higher than two plots sold at auction in September 2005 when two adjoining sites opposite Hoi Fu Court and Park Avenue fetched between HK$5,300 and HK$5,400 psf.
It was also a consortium involving Sino Land (0083), Nan Fung Development, and Chinese Estates Holdings (0127), that won those sites.
Lau said the latest land sale may not stimulate secondary prices too much as the market had been over-optimistic with their estimates before the auction. ``With [the final price] at the lower end of the market, some owners may not be so aggressive in hiking their prices,'' Lau said.
Ricacorp Properties executive director Willy Liu Wai-keung agreed the lower-than-expected price would be healthier to the market.
He said if the site had sold for a higher price, then the Hoi Fai plot set for auction could be bid even higher.
``The market may not accept such price levels,'' Liu said, referring to secondary market owners possibly being too aggressive in pricing.
Hong Kong Property Services (Agency) reported that some owners are increasing asking prices by 2 to 6 percent after the auction.