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1. Developers look for new angles

1. Developers look for new angles
Raymond Wang, The Standard 7 March 2004

Unable to initiate a land auction as the government insists on keeping prices of reserve list plots at market levels, developers are resorting to other means to replenish their land banks, such as private tenders and negotiations.

It is more than a month since the government resumed the land application list programme, and real estate agencies say prices on the application list have been raised about 20 per cent since January in response to rising home values.

Repeated attempts by developers to draw at least two residential land lots - one on The Peak and the other in Aberdeen - have not been successful.

A latest revised offer of about HK$1,100 per square foot for a residential lot on Welfare Road in Aberdeen - measuring 68,923 square feet in size with 551,385 sqft gross floor area (for development) - failed to meet the government's minimum price.

While market observers expected the plot would be auctioned at about HK1,500 per square foot, previous attempts to draw the land for HK$800 psf, HK$900 psf and HK$1,000 psf have failed.

Three offers by Chinese Estates Holdings, controlled by Joseph Lau, to draw The Peak plot at 12 Mount Kellett Road have been rejected. Sources said the last offer was ``very close'' to the estimated HK$470 million demanded by the government.

Because of these rejections, developers including Cheung Kong Holdings and Sino Land are now seeking other ways to replenish their land banks.

Cheung Kong Holdings has outbid other major developers to buy a residential site in North Point for HK$265 million, representing an accommodation value of about HK$2,500 per square foot, industry sources said. The 13,240-square-foot site at 880-886 King's Road is near to Cheung Kong's Harbour Plaza North Point hotel.

With a plot ratio of eight times, the project will generate a gross floor area of 105,920 sqft when completed in two years. Prevailing price levels for new flats in North Point are around HK$5,000 psf, property agents said.

Sino Land bought a residential site at 53 Conduit Road, Mid-Levels, for about HK$250 million, or an accommodation value of about HK$3,800 psf, compared with the HK$3,100 psf price of a nearby site sold in September last year.

A medium-sized developer which declined to be named said the government's firm stance on prices could cool off developers' desire to draw land. Developers remain cautious when drawing land and their offer prices will reflect the risk of a possible market downturn, the developer added.

Midland Surveyors director Ronald Cheung said an upward adjustment in the government's reserve prices based on the market is reasonable.

Cheung said developers - who need to buy more land - will eventually submit bids that meet the government's minimum price.

Director of Lands Patrick Lau, who announced the resumption of land sales in January and expects the first auction next month, said there is no need to worry about the low prices submitted by developers - the government would insist on keeping the pricing at market levels.