WORLD PROPERTY CHANNEL ®

Li Ka Shing

Despite the government's attempt to hold down commercial real estate prices, two prime Hong Kong development lots have sold at above-market amounts at a hotly-contested and closely-watched government land auction.

Cheung Kong (Holdings) Ltd., controlled by billionaire Li Ka-shing, bid 7.61 billion Hong Kong dollars (US $976 million).

Dow Jones.com reported six bidders vied for one of the sites that Cheung Kong bought, a prime residential plot in Kowloon City, across the harbor from Hong Kong Island.

The company said it paid HK$4.1 billion for it, which translates into a value of HK$10,399 for each square foot of buildable space the site could accommodate.

The sales price was 44% above the opening bid of HK$2.86 billion, and was higher than the HK$3.5 billion to HK$3.94 billion expected in a poll of eight surveyors and analysts.

Hong Kong land - Cheung Kong

The government also said it would sell an additional three sites before the end of September following Tuesday's auction, which was the fifth in the current fiscal year ending March 2011.

Victor Li, vice chairman of Cheung Kong and son of Li Ka-shing, told Dow Jones the two sites were particularly appealing because of their location.

The company, the city's second-biggest developer by market capitalization after Sun Hung Kai Properties Ltd., also won the second site located in Hung Hom--where Cheung Kong has a major presence.

That waterfront site, also on the Kowloon side of Hong Kong's Victoria Harbor, attracted 11 bidders, and was sold for HK$3.51 billion, translating into HK$9,597 a square foot.

Hong Kong Hung Hom land site

The Hung Hom site sold for nearly double the opening bid of HK$1.77 billion and fetched far more than forecasts of between HK$2.3 billion and HK$2.8 billion.

Hong Kong's property prices have risen 13% so far this year following a 30% jump in 2009, prompting the government to tighten mortgage lending and increase land supply.

In a recent new move, the government said it was banning sales contracts on new condominiums being flipped before the properties are delivered.

Also, the Hong Kong Monetary Authority ordered banks to stress-test mortgage applications to ensure that borrowers could withstand an interest-rate increase of two percentage points.

Commenting on the two lands sales, Alvin Lam, a director at Midland Surveyors, said, "We are talking about years of investment and construction for property projects, something in the medium to long term." Added Alfred Lau, an analyst at BOC International, "Developers won't give up good and quality sites just because of short-term policy volatilities,

"The result was good for Cheung Kong. The firm needs to replenish its land bank, and it also has a very strong balance sheet to support the acquisitions," he said.

---