This Weekly Snippet has a focus on the New Territories North (NTN) and how the construction of the Northern Link is set to enhance connectivity, support overall development, and draw attention from major developers. Commenting on the sale of two sites in NTN, Freddy Wan of Capital Markets & Investment Services shares his insights into NTN’s housing market, and Pureanae Jang of Valuation & Advisory Services gives her thoughts on the China Evergrande Group in Yuen Long.
Developers demonstrate high confidence in New Territories North
Recent land sales in the NTN are hinting at strong developer confidence in the area’s property market. This is evidenced by Sun Hung Kai Properties (SHKP) acquisition of government land in April in Kwu Tung North at a unit price of $7,184 per sq. ft., which is around 44% higher than the market expectation. Another good example is CK Asset’s purchase of another plot of government land in Yuen Long in August, which had a higher unit price of $9,112 per sq. ft.
The driver behind this demand can be attributed to domestic needs together with a strong investment appetite in residential properties. The change of the public housing and private residential ratio from 6:4 to 7:3 has also reduced the expected housing supply and is likely to push prices up. These changes also sit under the backdrop of the current quantitative easing measures, high levels of capital in the market, and a low interest rate environment. When all these factors are taken into consideration, we anticipate record high property prices will emerge in the coming near future.
China Evergrande have ‘high’ hopes for land in Yuen Long
According to market news, the China Evergrande Group hopes to sell a 1.7 million sq. ft. plot of undeveloped land near the Mai Po Wetlands in Yuen Long. The plot was purchased as agricultural land from Henderson Land Development for HK$4.7 billion, and they then paid a further HK$4.2 billion to the Lands Department for a Land Exchange for a New Grant to upgrade the land use from agricultural to residential.
The asking price for the plot is thought to be close to HK$8 billion (Accommodation Value (AV) on GFA: HK$8,959 per sq. ft.), lower than the HK$8.9 billion (AV on GFA: HK$9,966 per sq. ft.) paid in mid-2019 when it was based on an approved GFA of 893,006 sq. ft. Over the last few years, land in NTN has been commanding above-market land prices due to the diminishing geographical boundary between Kowloon and the New Territories.
This year, the Lands Department successfully tendered out three residential land sales:
- In April 2021, Sun Hung Kai Properties won the Fanling Sheung Shui Town Lot No 279 at Area 25, Kwu Tung, paying an accommodation value of HK$7,184 per sq. ft.
- In June 2021, Wing Tai Properties won a residential site at the junction of Fan Kam Road and Castle Peak Road in Kwu Tung, paying an accommodation value of HK$9,209 per sq. ft.
- In July 2021, Wheelock won Sheung Shui Town Lot No.278 in Area 24, paying an accommodation value of HK$8,499 per sq. ft.
Considering Evergrande’s land location compared to SHKP’s Kwu Tong project, Evergrande’s outlay at almost HK$10,000 per sq. ft. on AV would seem to be on the high side. The higher price is especially noteworthy, given that Kwu Tong will have an MTR station and plans for a slew of new town developments.