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Harder for HK developers to replenish land bank with the influx of PRC counterparts
Hong Kong, 28 November 2016 – Notwithstanding the latest stamp duty measure, residential prices are expected to rise up to 5% next year, according to JLL's Year-end Residential and Land Market Review 2016 published today. The competitive in land market will continue next year due to the influx of mainland developers and new local players. It has become harder for Hong Kong heavyweight developers to win development sites.
Land sales market
Land prices rebounded in the second half of 2016 as more prime sites were made available for sale amid active participation from PRC and local developers. About 62% of the residential sites made available for sale via government tender this year drew PRC developers, an uplift from the 53% recorded in 2015. PRC developers were on the winning end of 24% of all residential sites sold this year, on par with that a year ago. Their increased participation in the local public land sales market has been driven by a combination of yuan devaluation, a desire to diversify away from mainland cities and supply constraints of the local market over the longer-term.
Increased competition in the public land sales market saw 10 out of 13 residential sites sold at prices above market expectations in the second half of the year, in contrast to the first half of the year when no sites were sold above the higher end of market estimates. Also, there has been an increase in the average waiting time between winning bids by developer from 12.6 months in 2015 to 27.6 months in 2016 (year-to-date). Looking ahead, we may see more developers entering into joint ventures to increase their chances of winning in government tenders.
Dorothy Chow, Regional Director of Valuation Advisory Services at JLL in Hong Kong, said: "In 2016, Hong Kong's heavyweight developers faced increased competition from both mainland developers and new local players. It has become harder for them to win land sites and we believe the situation will continue into 2017. Mainland developers will remain active in government land sales to expand their business in Hong Kong whilst local developers will likely focus more on opportunities in the New Territories and MTR projects.
However, the public land sales market does face some uncertainties, including:
Hong Kong Prime Residential Indicator - % Change
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