WORLD PROPERTY CHANNEL ®

Hong Kong

If Hong Kong land prices are cooling off, you couldn't tell it by the most recent dirt deal.

A 1.5-acre prime residential site (about 65,402 square feet) has sold for $1.5 billion or about $3,438 per square foot.

Developer Cheung Kong (Holdings) Ltd., the property flagship of businessman Li Ka-shing, won the site on Borrett Road near Victoria Harbour in the Mid-Levels district. The price was 11.65 billion Hong Kong dollars.

The developer told the media the price was within its budget and that it was a rare opportunity to acquire such a prime site, The Wall Street Journal reported.

At HK$26,763 per square foot,  the land is among the city's most expensive, though the purchase price was below the forecast range of HK$12 billion to HK$15.2 billion from five analysts polled by Dow Jones Newswires.

"This is a super luxury location," said Cheung Kong Deputy Chairman Victor Li, eldest son of the Hong Kong tycoon.  "We won't sell these apartments so easily, so we may consider leasing them out first."

Hong Kong Financial Secretary John Tsang again warned property buyers of the risks in the market, citing rising mortgage interest rates, the WSJ reported. Tsang said for the first time that the government will consider proposals to restrict foreign ownership of Hong Kong property.

"There's higher risk for the property market in Hong Kong due to local banks continuously increasing mortgage interest rates," Tsang said at a legislative council meeting.

The city's interest rates have been near zero since late 2008. Its monetary policy moves in lockstep with that of the U.S. because of the local dollar's currency peg to the U.S. dollar.

Cheung Kong at the same auction also bought a much smaller site in the New Territories for HK$300 million; more than double the opening bid of HK$132 million, and within the analysts' forecast range of HK$200 million to HK$330 million.

Hong Kong's average home prices rose around 24% in 2010, following a 30% jump in 2009, as abundant liquidity and record-low interest rates helped boost demand. A flood of mainland Chinese buyers has also driven the market boom, prompting many local residents unable to afford private housing to demand official intervention to rein in prices.

Major local lenders, including the Asian unit of HSBC Holdings PLC and BOC Hong Kong (Holdings) Ltd., have raised their rates several times in the past few months, driven by strong demand from local residents and wealthy mainland investors.

One Hong Kong observer who was not impressed with the high-dollar amount of the land sale was a prominent Hong Kong financial blogger who calls himself Zarathustra. He is the founder and managing Editor of Also Sprach Analyst, an online financial newsletter.

"The Borrett Road site in Hong Kong has disappointed," Zarathustra writes on his blog.  "The pace of the bidding has been extremely slow and boring at the beginning, and despite all the media focuses on this site in hope it will break the all-time record of HK$11.82 billion, it disappointed.

"Cheung Kong bought this site for HK$11.65 billion; below the lower bound of market consensus (the market was expecting HK$12.2 billion to HK$15.2 billion)."

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