Hong Kong Governments Land Auction Fetches Less Than Expected
08 September 2011
A Hong Kong land auction failed to raise as much as expected, for the third successive time. The residential plot in the Tseung Kwan O district was sold for HK$3.12 billion, whereas estimates had put its value at between HK$3.3 billion and HK$4.4 billion.
The Hong Kong government began boosting the supply of land to to curb runaway house price growth, after house prices were found to have grown 70% since early 2009. It also sold two sites in August for less than estimates.
But fears over the economy are now adding to the downward pressure on prices, and analysts now think that property prices here could begin to fall. Some are estimating price drops of around 10% during the next two years, while others think they could fall by as much as 20%.
The Tseung Kwan O plot being the largest on offer at the auction could have affected its earning potential, as it requires more money for development.
The government has now sold 19 sites through auction or tender during the current fiscal year that began on April 1, and it sold 17 sites in the previous financial year.
During August the number of transactions suffered its largest drop since February 2009, which was also the first consecutive monthly drop since December 2008.
During the last few weeks transactions have virtually ground to a standstill as buyers are choosing to wait and see which way the market will go. At the moment the city is the most expensive place in the world in which to buy a home, and is 55% more expensive than London.