China’s developer interest in Hong Kong compulsory sales is growing.
In Hong Kong, compulsory selling applications increased by 160 percent in 2018. real estate companies in qatar
Growing interest from People’s Republic of China (PRC) developers in acquiring older buildings for redevelopment in Hong Kong led to the Lands Tribunal receiving a total of 39 compulsory sale applications in 2018, up 160 percent from the previous year, according to JLL’s latest Residential Sales Market Monitor Report released this week.
Henderson Land, a local developer, submitted seven applications to the market during the year. PRC developers refocused on older properties as a source of land supply in 2018, with Vanke Property submitting a total of 8 applications, including a large-scale site amalgamation project at Hai Tan Street in Sham Shui Po, after being conspicuously absent in 2017.
According to JLL’s senior director of capital markets, Henry Mok, “The process of obtaining construction sites through compulsory sales is more time-consuming and complicated than government land sales. It may also have higher upfront costs and uncertainties in some situations. Compulsory sales have become an increasingly desirable source of land supply as PRC developers find it more difficult to gain sites in government land sales. According to JLL data, PRC developers won just 27% of government land tenders for residential construction sites in 2018, compared to 70% in 2017, despite maintaining a high participation rate “”I ate tenders.”
Denis Ma, the head of research at JLL, added, “Part of the increasing interest in compulsory sales among PRC developers can be attributed to their growing familiarity with the Hong Kong property market and comfort in pursuing more complex investment opportunities. Site amalgamation is seen as an effective way to acquire land, particularly smaller plots in prime locations, given the government’s shortage of development sites sold in urban areas in recent years. In the near future, we expect compulsory sale applications to continue to increase due to the government’s restricted availability of urban development sites in its land sale program.”
For Hong Kong homebuyers, location is becoming less of a factor.
The price gap between new homes and existing homes has narrowed by 21 percentage points to 14 percent.
According to JLL’s latest Residential Sales Market Monitor Study, the price premium commanded by new mass residential flats of 752 sq. ft or less on Hong Kong Island over the New Territories has narrowed from 90% to 79 percent over the last five years.
Housing prices are convergent throughout the territory, according to data from the Economic Property Research Centre (EPRC). Over the last five years, the price premium of new mass residential flats in Kowloon over the New Territories has decreased from 35% to 14%.
JLL’s head of research, Denis Ma, said, “The concentration of new supply being developed in the New Territories over the last five years can explain some of the price convergence. The New Territories has attracted considerable interest from buyers as a result of the government’s demand-suppression policies, which have steered first-time homebuyers towards the primary sector, where prices are more affordable.”
He went on to say that “the growth and proliferation of decentralized office nodes has also played a role in helping to boost demand.” Since 2014, the number of households and mass housing prices in Sai Kung’s primary market have increased by 7% and 23%, respectively, according to data from the Census and Statistics Department and EPRC. The majority of this development has occurred in Tseung Kwan O, which has become a more desirable place to live as a result of its proximity to Hong Kong East and Kowloon East’s expanding business districts.
According to JLL, between 2019 and 2021, a total of 55,700 mass residential units will be completed, with around 60% of them being installed in the New Territories.
JLL’s senior director of capital markets, Henry Mok, says, “Demand for new developments in the New Territories should remain high, particularly with the completion of new transportation links such as the Shatin to Central Link and the Tseung Kwan O-Lam Tin Tunnel. The influence of location on buying decisions is likely to continue to decrease as rural areas grow. Rural prices can be supported by structural improvements, but the direction of movement will be heavily influenced by whether the bulk supply can be completely digested, especially during a market downturn.”
