- Buyers are likely to balk at the HK$3.1 billion to HK$5 billion estimates for the six mansions in the current economic and political climate, say market observers
- The property could fetch as much as 20 per cent discount to similar sized plot in the same neighbourhood bought by China Resources in 2018
A prime Hong Kong property put on the market by the US government has hardly generated any excitement among the city’s developers, as they weigh the sector’s prospects amid a difficult economic and political climate, while market observers expect the sale may not live up to its top billing.Last Saturday, the US government invited tenders for six multi-storey mansions at 37 Shouson Hill Road with stunning views of Deep Water Bay. However, market observers said the plot with an area of over 90,000 square feet may not fetch the estimated value of between HK$3.1 billion (US$400 million) and HK$5 billion.
They pointed to the sale of a neighbouring site of a comparable size that fetched less than the estimates for the US government-owned property. Mainland investor, China Resources, paid HK$5.93 billion for 39 Shouson Hill Road in July 2018.
The price could be 10 to 20 per cent lower than the HK$85,000 per sq ft paid by China Resources, said Charles Chan Chiu-kwok, managing director of Savills Valuation and Professional Services. Savills values the property at HK$3.2 billion.
The developers, however, have put their bean counters to work to see if the numbers work out in their favour.
“We are interested in it, and our colleagues are looking into it,” said Stewart Leung Chi-kin, vice-chairman of Wheelock and Company. He added that there was no doubt about the site’s location, but if the plot ratio is kept low then they might not be as interested.
Market observers also said that the buyer will have to pay additional land premium if they want to redevelop it and increase the plot ratio, as a higher ratio will allow them to increase the gross floor area.
Donald Choi, CEO of Chinachem Group, said that right now there were a lot of concerns swirling around and the price has to be definitely lower than the neighbouring plot.
He said the concerns foremost on his mind were the future relations between the US and China in the wake of China proposal for a national security law for Hong Kong and the impact of Covid-19 on the city’s economy.
Hours before the tender proposal was extended, the US government had determined that Hong Kong had lost its autonomy from China, and President Donald Trump threatened to withdraw Hong Kong’s special trade privileges and impose other unspecified sanctions.
Choi said that since the land is not likely to be sold through company-share transfer as it has been put for sale by the US government, the buyer will be expected to pay a massive stamp duty.
“Also any possible additional investment, for example, cost for traffic study if we want to change the ratio and extra land premium, will all have to be taken into consideration if we are going to make an offer,” said Choi.
Meanwhile, mainland investors, major buyers of Hong Kong’s ultra luxury homes, have remained silent.
Tommy Chan, an agent at Midland for The Peak and South Island, said that he had sent the information to a few potential mainland clients, but he was yet to hear from them.
The US government bought the land in June 1948 for an unknown price when Hong Kong was still a British colony, according to public records at the Land Registry. Construction on the site was completed in 1983.
Vincent Cheung, managing director of Vincorn Consulting and Appraisal, said that he was sure the buyer will knock down the current buildings and build new homes as they will not be able to make any profit through just the resale of mansions in the current market.
“That neighbouring land was sold when the market was hot. Now it is different. We will not see that price,” said Cheung, who estimates for the land value at a range of HK$3.1 billion to HK$3.5 billion.
Separately, CBRE, the sole agent for the sale, said on Tuesday that the tender submissions for the property will close on July 31.