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1. First auction tipped to set benchmark for prices

2. Village resistance to Cheung Kong offers

1. First auction tipped to set benchmark for prices
Karen Chan, The Standard 30 April 2004

While many developers have tried to obtain land on the government's land reserved list over the past few months, K Wah International has succeeded in getting two sites in Ma On Shan and Sha Tin on the list for auction on May25.

Given the rather restricted land supply schedule for the current fiscal year and the relatively few means for small and mid-cap developers to replenish their land banks, analysts predict spirited bidding at the auction, with the winning bids likely to be well above the minimum guaranteed prices.

Developers have recently slowed down their pre-sales schedule because of concerns they will be unable to replenish their land banks on time. The auction should provide a positive impetus for the overall property market.

The Lands Department has announced the minimum guaranteed price for the two sites, which is HK$1.206 billion or HK$1,666 per square foot for the Ma On Shan site and HK$496 million, representing HK$1,798 psf for the Sha Tin site.

Citigroup Smith Barney analyst YK Fu said that for the 753,805-sq-ft site at Ma On Shan, assuming a construction cost of HK$800 psf and a 25 per cent Ebit (earnings before interest and tax) margin, the minimum guaranteed price will imply a selling price of HK$3,288 psf upon completion. This is about 6.1 per cent higher than the average price for nearby Ocean View.

For the 260,782-sq-ft higher-end residential site in Sha Tin, assuming a construction cost of HK$1,000 psf and a 25 per cent Ebit margin, the minimum guaranteed price will imply a selling price of HK$3,730 psf on completion, Fu said. This is about 10 per cent higher than the recent average selling price at nearby Pristine Villa.

Daiwa Institute of Research analyst Natalie Chow believes that the first and larger site is more indicative for the overall market.

The price guaranteed by K Wah is 12.2 per cent more than what it paid for an adjacent site at a government land auction in February 2001 and 13.3 per cent above what Sino Land paid for another adjacent site in August 2000.

``Based on these figures, we may infer that land prices have already surpassed the year-2000 level,''she said. ``It also indicates that the government's floor price for land is the prevailing market price based on the current market price of about HK$3,500 psf for this project.''

Chow suggested that the forthcoming land auction will also help to provide a benchmark price, which she believes is a key requirement to drive the market.

2. Village resistance to Cheung Kong offers
Raymond Wang, The Standard 30 April 2004

Cheung Kong (Holdings) and partner Far East Hotels and Entertainment are likely to scrap plans to develop a long-delayed HK$10 billion residential project in Lai Chi Kok.

Industry sources said compensation negotiations with 200 residents in the site targeted by the two groups for redevelopment had been slow.

Although the residential project was first approved by the Town Planning Board in 1996, the developers were unable to pursue the project due to the slow progress of land-purchase negotiations, the sources said.

The board recently rejected the developers' fourth application to further delay the project.

Developers can apply to the board for a delay if construction of their approved projects cannot start within two years, according to the Planning Department.

Neither Cheung Kong nor Far East Hotels was available for comment.

The project, located at Kau Wa Keng Old Village, would feature 11 blocks of residential towers, which could provide a total of 2,500 units with a gross floor area of more than 2.2 million square feet.

The total investment costs are estimated at more than HK$6 billion. Based on current market prices of more than HK$4,000 psf for new flats in the district, the project is worth nearly HK$10 billion, property agents say.

The project is near Nob Hill, a project developed by Cheung Kong and Far East Hotels. All 696 units in the three towers at Nob Hill were sold in 2002. Prices for those units in the secondary market range from HK$3,600 to HK$4,500 psf, Midland Realty senior sales manager Tony Yau said.