China Overseas Land & Investment Bags Kai Tak Plot With $551M Bid

Mainland muscle is flexing yet again in Hong Kong’s land market, as China Overseas Land & Investment on Wednesday beat out nine rivals, including eight of the city’s top local builders, to snag a waterfront residential plot in the Kai Tak area.

The successful land sale by the Hong Kong government followed a series of cancelled tenders for parcels along the scenic stretch that once hosted the city’s international airport.

The red chip developer known as COLI made a winning bid of HK$4.27 billion ($550.8 million) for New Kowloon Inland Lot No.6603 at Kai Tak Area 4E Site 1, an inlet-facing site spanning 59,719 square feet (5,548 square metres). The purchase of the first Kai Tak site to be successfully auctioned this year marks the state-controlled developer’s fourth buy on the former airstrip in the last two years.

The parcel will yield an estimated 328,450 square feet of built area for the project, meaning COLI paid HK$13,009 per square foot of housing. That figure represents a 1.7 percent discount to the HK$13,236 per square foot that the developer, along with three consortium partners, paid for a harbour-facing site at Kai Tak in November 2019, suggesting a steadying of the city’s residential property market.

Mainlanders Making Waves

The Kai Tak plot is the latest chunk of Hong Kong land bought by mainland interests in 2020. Of the 14 major land sales in Hong Kong this year, at least nine had mainland buyers, according to a Mingtiandi analysis.

Of the HK$26.8 billion spent at Hong Kong government land sales in the year to date, HK$19.8 billion (74 percent) came from mainlanders.

Dorothy Chow, senior director of valuation advisory services at JLL in Hong Kong, said mainland developers have been aggressive in their bids for government sites, probably due to their keenness to increase their share of the market.

“The point that most of the land sales in Hong Kong this year have been won by mainland developers indicates that developers, no matter mainland ones or local ones, are confident about the long-term property market in Hong Kong,” Chow said.

Despite an unexpected 0.6 percent decline in Hong Kong home prices in October as a fourth wave of COVID-19 kept citizens indoors, Chow pointed to the low interest rate environment and a limited supply of new housing as factors propping up demand.

“Upon the easing of COVID, first-hand sales may further improve in 2021,” she said.

Betting on a Rebound

Recent headlines have hinted at a housing recovery after confidence remained negative for a 15th month out of the past 16 in October, according to an RICS-Spacious report on the city’s residential market.

In late October, Hong Kong’s Wang On Properties and Shanghai-based developer CIFI Holdings announced their acquisition of two adjacent properties in the city’s Fortress Hill area, with plans to develop a HK$2.6 billion combined commercial and residential project on the site.

The partners paid an estimated HK$1.88 billion for the two sites, despite the housing downturn since the pair launched a Kowloon East residential joint venture in 2018.

In Kai Tak, COLI’s winning bid of HK$4.27 billion exceeded market expectations, which valued the site at between HK$3.28 billion and HK$3.94 billion, said Thomas Lam, executive director and head of valuation and advisory at Knight Frank in Hong Kong.

“We expect total investment for the Kai Tak site to amount to about HK$6.5-7.5 billion,” Lam said, estimating that the project would offer 800-1000 residential units fetching around HK$28,000 per square foot.

Given that the site is close to plots previously purchased by COLI and its joint venture partners in recent years, Lam speculated that “synergy” among the various sites could benefit development, pricing and marketing strategy.