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1. KCRC station site for premium cut

1. KCRC station site for premium cut
Raymond Wang, The Standard 27 June 2006

The government plans to slash the land conversion premium for a Tuen Mun station property development by a third, possibly as soon as this week, to reflect the recent softening of the real-estate market, sources said.

The Lands Department is prepared to make a revised land premium offer of about HK$3.72 billion, equivalent to about HK$2,400 per square foot, compared with about HK$3,600 psf demanded by the government last year, the sources said Monday.

Kowloon-Canton Railway Corp, the government-owned commuter rail operator that runs cross-border trains, scrapped the initial tender exercise for the residential and commercial project above Tuen Mun West Rail station late last year after being ignored by developers who felt the premium was too steep.

The KCRC said it plans to retender the project as soon as this week if the land premium offer is "verbally" made by the government. It declined to comment on the premium amount.

"There is a good sign on the progress of the land premium renegotiations," a KCRC spokesman said Monday, adding that the tender result may be announced as soon as next month.

Lands Department officials were not available for comment.

The KCRC restarted the pretender process last month with 12 expressions of interest received, including bids from Cheung Kong (Holdings), Sino Land, Sun Hung Kai Properties, Kowloon Development, Wheelock & Co, Hang Lung Properties, Kerry Properties and K Wah International.

The railway firm shelved the initial tender exercise last year because only Cheung Kong, controlled by tycoon Li Ka-shing, ultimately offered a firm bid for the project that had been estimated to cost up to HK$7.5 billion to develop.

That includes the construction cost of HK$1,200 psf and the land premium of about HK$3,600 psf asked by the government, even though the market estimate was about HK$2,600 psf at that time.

New projects in Tuen Mun, in the western New Territories , were selling for only between HK$2,000 and HK$3,000 psf late last year, real-estate agents said.

The KCRC recently renegotiated the land premium and is expected to reach an agreement with the government soon. Developers pay a premium to the government for change of land use.

"Since Hong Kong's housing market has recently shown signs of softening, with average selling prices falling 5 percent to 7 percent in the first half of this year, the price declines should be also reflected in land value," said Tony Chan Tung-ngok, executive director of Vigers Appraisal and Consulting.

"Selling prices for a number of developers' inventory flats in new projects have been recently cut by 20 percent to 30 percent to boost buying sentiment, as demand has been decreasing since late last year, partly linked to rising interest rates."

In a tender in April won by Cheung Kong (Holdings) for the residential development above the KCRC's Tai Wai station, near Sha Tin, the agreed land premium was HK$7.2 billion or HK$3,300 psf.

"There's no way Tuen Mun station is higher than Tai Wai," said Midland Surveyors associate director Alvin Lam Tsz-pun.