The sale of a government-owned 77,800-sq ft prime harbour front site in the Wanchai district of Hong Kong for $HK3.35bn (£242m) has smashed the auction record for land prices in the colony.
The purchaser of what is seen as one of the few remaining prime sites for office development in Hong Kong was Robert Ng, managing director of Sino Land. His company will develop the site as 1.3m sq ft of offices in a 50/50 joint venture with Sun Hung Kai Properties.
Other bidders at the sale included Li Kashing of the Cheung Kong and Hutchison Whampoa groups, the Cheng family’s New World, the Lau brothers and Y S Lo’s Century City.
The auction was held in City Hall and lasted just a few minutes with bidding climbing quickly from the disclosed reserve price of $HK2.5bn.
Hong Kong’s government auctions play a prominent role in a property market which underpins the value of the local stock exchange to a degree unknown in other markets.
“It’s very difficult for the private sector to assemble a site for commercial development,” says Alan Hill, managing director of Jones Lang Wootton in Hong Kong. “Any sites for development are made available as the government chooses. Land is disposed of by auction or by tender — but auctions are the favoured method.”
These auctions are conducted by a government employee who is a qualified chartered surveyor. Anyone can come to the saleroom and bid, but it is the government’s custom to disclose the reserve price prior to the auction. As the auctioneer calls out the bids, an interpreter translates them into Cantonese.
Despite the record price — more than double the $HK1.1bn paid in 1986 for the Victoria barracks in Queensway — some see the result as evidence that Hong Kong’s latest property boom is peaking.
Others believe that the result demonstrates the strength of a property market in a very unusual situation.
“In 1997 the Chinese Government takes over,” says Mr Hill. “Under the Sino-British Agreement all leases in the colony are extended for a term of 50 years to 2047. In the UK, 58 years would not be seen as an adequate period in which to recoup on the $HK9bn investment that the completed building will represent — but nobody in Hong Kong is losing any sleep over that!”.
by Denis Hall
