According to JLL's latest Hong Kong Residential Sales Market Report released this week, HNA Group and related companies have arguably succeeded in resetting prices in Kai Tak after snatching four residential plots for an average land cost of HKD 13,415 per sq. ft. Home prices in the vicinity grew by as much as 50% in less than a year.
Riding on the recent land price rally, One Kai Tak increased pricing of Phase II by about 13% to HKD18,100 per sq. ft, from Phase I. K City pushed the envelope higher to HKD18,900 per sq. ft, whilst the first batch of units at Poly Property were priced at close to HKD20,000 per sq. ft. These new benchmarks represent a surge of as much as 50% from market expectations prior to HNA's bids.
Henry Mok, Regional Director of Capital Markets at JLL, said: "The record-breaking land sale transactions have encouraged developers to raise the asking prices of their new projects, leading to a general increase in property prices. However, whether the upward trend of housing prices can sustain and whether developers can generate a reasonable profit from their recent land purchases, will largely depends on the market conditions at the time of sale. Changes in the financing environment, the land sale system and stamp duty rates, could weaken their case."
Ingrid Cheh, Senior Manager of Research Department at JLL, said: "The market has gathered pace in recent months, against steady performance of the stock market, a sustained low interest rate environment and a strong land sales market. Riding on this trend, cash-rich investors have been taking advantage of a loophole in the stamp duty levy by purchasing multiple properties under a single ASP as a first-time buyer, and avoiding the higher 15% stamp duty rate imposed on second homes. Developers have also pushed their list prices higher amid the buying frenzy."
"In view of the confirmed appointment of Carrie Lam as the new Chief Executive, we don't expect the government's land and housing policy to see dramatic changes over the next five years. Based on what has been reported so far, the new administration will likely uphold the status quo of boosting residential supply and maintaining a highly interventional approach in curbing demand," she added.