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Six out of eight residential sites sold above market estimates in the last three months.
HONG KONG, 29 September 2016 – The Government land sales market picked up in recent months and helped to boost buying confidence in the residential market. According to JLL's latest Hong Kong Residential Sales Market report, six out of eight public residential land sales tenders were awarded above market expectations in the third quarter.
Among the most notable transactions, Gingerlily Investments, a company held by local investor Angela Leong, acquired a residential site in Tuen Mun for over HKD 1.4 billion (an A.V. of HKD 6,800 per sq ft), paying 70% higher than market expectations. The streak of aggressive bids reversed the trend earlier in the year, when only three out of the eight awarded tenders scraped the lower-end of estimates.
This could be signal of restoration in developers' confidence in the market outlook. But this could also suggest that the land sales market has become more competitive as evidenced from an increase in the average waiting time between winning bids by developer from 7.3 months in 2014 to 12.6 months and 26.4 months in 2015 and 2016 (year-to-date), respectively. So far this year, PRC developers placed bids in half of the land sales tenders, on par with their participation rate in 2015.
As another reason behind the latest bidding trend, pre-tender estimates may have been set lower for a handful of recent land sale tenders due to the lacklustre land sales market at the start of the year. As a result, winning bids came out to be particularly eye-popping when sentiment rebounded. Meanwhile, the perceived rarity of a few recently sold sites, being the last ones left for sales in the immediate locality may have pushed bids further up.
Henry Mok, regional director of Capital Markets at JLL, said: "Our JLL Mass Residential Index, an index monitoring the price movement of major housing estates, grew 2.1% m-o-m in August, gathering pace from a 1.3% m-o-m in July. The rebound in property prices and strong sales in the primary market came in conjunction with increased keenness among developers in the land sales market. With the focus currently on mass residential projects, we expect the luxury market to gain a greater share of the limelight in the coming months, as some new projects such as Mount Nicholson on The Peak, 38 Inverness Park in Kowloon City and St. Moritz in Kau To should soon be launched onto the sales market. The level of buying interest for these projects, however, remains to be seen, as existing policy measures such as LTV restrictions and Double Stamp Duty continue to restrict liquidity of luxury properties in the market."
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