Property News Headline - Hong Kong
Out and about
Thursday, 12 April 2012
Thursday, April 12, 2012
Outlying islands have recently again become the stomping ground of a few developers which see great potential in luxury residential developments that leverage nature's gifts.
Several sites on islands including Lantau and Peng Chau have been sold over the past four months and some have fetched prices way below market expectations. Last month, a 49,127-square-foot residential site on Peng Chau was sold to Sino Land (0083) for HK$19 million, or HK$514 per buildable square foot - much lower than estimates of between HK$37 million and HK$150 million.
"The price was quite surprising. There were only two tenders for the site, which reflected weak interest among the developers," said Centaline Surveyors director James Cheung King-tat.
The site provides a gross floor area of 36,800 sq ft. Cheung added that factoring in construction and development costs future projects on the site will sell for between HK$2,000 and HK$2,500 psf. Neighboring properties now sell for between HK$2,300 and HK$3,000 psf.
Another 12,280-sq-ft site on Peng Chau was also triggered for sale earlier this month. The site - with gross floor area of 9,223 sq ft - was triggered for HK$5.5 million, or HK$596 per buildable sq ft. Industry sources said developers would build two- to three- story detached houses.
"Detached houses will provide expansive sea views, which adds a lot to the development potential," said Kenneth Cheung Chor-yin, executive director of Citiland Surveyors. Edward Yiu Chung-yim, assistant professor of the department of real estate and construction at the University of Hong Kong, said developers may be eyeing outlying islands to build luxury residences.
"From 1997, luxury property prices have outperformed the general property market. But since there is not much land supply in the traditional luxury [residential] areas, many developers started to upgrade some other areas into luxury property districts too," Yiu said.
Over the past decade, more luxury homes have cropped up in West Kowloon as well as in Shum Wan in the south of Hong Kong Island.
"Government measures in the past year limited the development of many new sites in urban areas, such as the stipulation of flat size and the number of flats. This prompted developers to look for areas with more developmental flexibility, and hence greater margins. These are some of the advantages that developers saw on outlying islands," he added.
For the Peng Chau site Sino Land bought last month, the price of future flats - HK$2,000 psf - could be at least two times more than the land cost - at HK$514 per buildable sq ft. Such high profit margin would be unlikely in urban projects.
The emergence of large property projects on outlying islands is not of recent origin. HKR International (0480) developed Discovery Bay on Lantau back in the 1970s. The low-density area was later shaped into a project that mainly attracted expatriates. However, there are disadvantages too, such as the distance and time for travel to work locations such as Central and Wan Chai. This has prompted developers also to build transport infrastructure and provide transport services.
Back in 2002, to attract homebuyers to Park Island on Ma Wan, Sun Hung Kai Properties (0016) launched ferries to and from Central, and buses to and from Tseung Wan, Tsing Yi and Kwai Fong.
Another challenge would be the acquisition of sites on islands.
"Most sites on islands, especially Cheung Chau and Lamma, had been passed on to descendants of island natives. There is a lot of legal work involved if developers want to buy sites. The process could take years," Yiu said.
There are four outlying islands sites on the application list.