LastsiteinKauTofetchedatHK$6,837psf:TheLandsDepartmentannouncedthatthelandtenderofShaTinTownLotNo.578inArea56A,KauTo,wasawardedtoPaliburgandRegalHotelsatHK$2,390million,orAVofHK$6,837psf,basedonareportedGFAof349,547sf.ExcludingtheunitrestrictedsiteacquiredbySinoLandandKerrybackinAugust2011,thisisthelowestamongthe7othersitesdisposedin2012and2013inKauToareawithoutdevelopmentrestrictions.Ontheotherhand,SinoLandacquiredasmallsiteinWanchai(reportedGFAof11,194sf)forHK$140mnofHK$12,497psfonreportedGFA.
Landcostis18%belowrecenttransaction:TheAVofKauTositeis18%belowthelandpricepaidbyChunWoDevelopmenttwoweeksagoforLot579andbelowmarketexpectationofHK$7,000-8,000psf.AccordingtoHKET,Paliburgplanstobuildsome30townhousesandover100apartmentswithatotalinvestmentcostofHK$4.2-4.5bn.Therearealtogether8biddersforthesite,includingCheungKong,SHKP,SinoLand,KWahandWheelock.
Implications:
Loweringriskappetiteofdevelopers:OtherthanTseungKwanO,KauToisakeyareaoflandsupplyinthepast1-2years.ThelandpriceinthatareapeakedatHK$10,885psfinMarch2013whenSHKPboughtLot566,siteB2.Thetransactedlandpriceofeachsiteafterthathastrendeddowneverytime.
Comparedwiththepeak,theAVofLot578soldyesterdaywas37%belowthepeakprice,implyingcertainprojectscouldbelossmaking.Thisindicatesthatdevelopersareloweringtheirriskappetiteandadjustinguptheirrequiredreturnwhentheyacquirenewprojects.
Smallerdevelopersarekeeneronlandacquisitions:TherecentlandtendersweremainlyawardedtosmallerdeveloperssuchasWingTai,ChunWo,Paliburg,implyingthatthelargerplayersaremoreconservativeintermsofpricing.Inparticular,CheungKonghasnotwonanylandtenderin2013.Goingforward,whenlarge-scaleprojectssuchasMTRprojectsareputupfortender,thereisapossibilityofsitewithdrawalorthesitesellingatalowprice.
Site-specificfactorsaffectingdeclineinlandprice:Thefallinglandcostispartlyattributedtothelessdesirableviewandhigherdevelopmentdensityoftheproject.Withaplotratioof1.86x,theprojectcannotbedevelopedasapuretownhouseprojectandapartmentswillyieldalowerASPcomparedtotownhouses.
WanchaisiteprovidingpricingsupportforupcomingprojectTheAvenue:ThesiteatWanchaithatSinoLandacquiredisrelativelysmalltorepresentthedeveloper'sviewonthemarket.Itmaysomehowsuggestthatdevelopersaremorepositiveonurbanarearesidentialmarket.Infact,wethinktheAVatHK$12,497psfcouldprovidepricingsupportfortheirupcomingJVresidentialprojectTheAvenueinWanchai,whichisexpectedtolaunchin4Q13.