Hong Kong property: developers give land for starter homes in Tsuen Wan the cold shoulder as market struggles with high rates, low demand
- Only Grand Ming Group bid on deadline day for the parcel earmarked for 1,950 flats that must be offered as starter units priced at 80 per cent of market value
- The ‘complicated’ nature of the project, which comes with numerous restrictions, may also have put developers off, according to analysts
The “complicated” nature of the project, which comes with numerous restrictions, may also have put potential bidders off, according to analysts.
Only one bid was submitted on Friday, the last day of the tender period, by Grand Ming Group Holdings. It is unlikely that many, if any bids, preceded it, although the government has yet to reveal the number of submissions.
“Interest rate hikes will have deterred developers and made them more conservative in their bidding, while the current property market atmosphere makes it difficult for them to predict future selling prices.”
Tsang Ka-man, the executive director of Grand Ming Group, said the developer has been monitoring land purchase opportunities over the past year, and has itself adopted a more cautious approach to land investment.
“We believed the construction cost is manageable and therefore bid for the project,” said Tsang. She believed the many restrictions in the terms and conditions had deterred other bidders.
Only Hong Kong residents who have lived in the city for at least seven years and never owned a home in the city are eligible. Their income should fall between the limits for applicants for the Home Ownership Scheme and a level 30 per cent higher.
“The project is a bit complicated, with many restrictions, and targeted at a very specific market,” said Lam, adding that the lack of flexibility implied by the restrictions increases the risks for developers.
“Some developers will have made their calculations and decided they might as well invest in other plots of land that do not have so many constraints.”
Analysts had previously estimated the value of the Yau Kom Tau site at between HK2.1 billion (US$270 million) and HK$4.22 billion. Midland Surveyors valued it at HK$2.83 billion, or HK$2,700 per sq ft.
Owners of starter homes are only allowed to sell or let their units in the open market after five years and must pay a premium to the government to remove the restrictions.
Hong Kong’s developers have been struggling against rising interest rates, an economic slowdown, and the highest inventory in years.
The number of unsold units in completed projects is the highest since 2007, according to JLL, which said earlier this month that a total of 83,000 housing units are available, with 18,000 in completed projects and the rest under construction. About 25,000 more units are expected to hit the market in 2023.