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Dow Jones Newswires -- November 19, 1997
HK Land Auction Seen Supporting Property Market: Amplifier [Image]
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By DAISY S.Y. WONG
AP-Dow Jones News Service [Image]
HONG KONG -- Robust bidding at the government's land auction
Wednesday lent support to the property market in Hong Kong, which
has suffered an accelerated price slide since the stock market
selloff in late October.
The two sites offered were sold at higher-than-expected prices,
which demonstrated optimism among local developers over the
long-term prospects in the property market, analysts said.
Property prices 'may not recover in the coming quarter but it's
certain that developers are bullish on the property sector
farther in the future,' Tony Chan, managing director of local
property agency chain Ricacorp Surveyors Ltd., said. The
developers 'are looking forward to what the market will be in the
next two to three years, which is expected to be better.'
The two lots were snatched up by Yu Tai Hing Co., a private
developer, which bid aggressively against other small to
medium-sized companies in the packed auditorium.
The first site, a luxury lot in Chung Hom Kok on the upscale
South Side of Hong Kong island, was sold at more than double its
opening price at HK$221 million and came off the block in about
five minutes.
According to Lanbase Surveyors Ltd.'s director, C.K. Chan,
apartments at the site will be sold at HK$13,000 per square foot
when construction is completed in three years time, a level
higher than current secondary prices nearby.
The second site at Hung Hom, on Kowloon side, was sold to the
same bidder for HK$276 million, which exceeded analysts'
expectations of HK$190 million to HK$215 million.
The auctioning of the Hung Hom site took longer than the first
lot, lasting for about 40 minutes. However, that's because after
the bidding breached HK$210 million, the increments were changed
to HK$1 million from HK$5 million.
All but three bidders dropped out of the auction after the price
of the site passed HK$200 million.
Large developers, however, were notably absent from the bidding
Wednesday, although most of them attended the sale.
Representatives from blue-chip property companies such as Cheung
Kong (Holdings) Ltd. (H.CKH) and Sino Land Ltd. (H.SNL) sat
quietly throughout the one-hour bidding process.
'Many big developers came but they didn't raise hands,' Chan at
Ricacorp said. 'But many small developers, which didn't come in
the past, raised hands.'
Some analysts speculated that the lots were too small for the
blue-chip companies. Nevertheless, many of them probably came to
get a sense of the appetite for lots in the property market amid
Hong Kong's current high interest rate environment.
Wednesday's winner - Yu Tai Hing - is a small property developer
that's been in operation for 50 years and has been absent from
government land auctions for the past five years. Officials at
the company described the bidding price as reasonable.
'It's a good bargain,' Yu Tai Hing Chairman Lo Siu Tong told
reporters after winning the sites.
Lo said the company plans to spend more than HK$80 million
developing the sites, which are expected to be completed by
mid-1999 at the earliest.
Ricacorp's Chan noted Yu Tai Hing lends money to other local
property companies and added the company's aggressive bidding may
indicate its strong cash position.
Chan said the supposed high-cash position of Yu Tai Hing makes it
less vulnerable to high interest rates, which have hurt larger
companies that borrow extensively in the market.
Some, however, cautioned investors against reading too much into
Wednesday's auction.
'These two sites are relatively small, so they shouldn't have too
much bearing on the market,' said Herbert Lau, a property analyst
at Vickers Ballas Hong Kong Ltd.
In response to the better-than-expected auction results, Hong
Kong stocks erased part of their earlier losses in afternoon
trading.
The blue-chip Hang Seng Index finished at its intraday high of
10,154.36 points, although it was still down 90.82 points from
Tuesday's closing level.
-Daisy S.Y. Wong; 852-2802-7002; dwong@ap.org
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