HONG KONG • In the latest sign that Hong Kong's property correction is deepening, a parcel of land sold by the government in the New Territories went for nearly 70 per cent less per square foot than a similar transaction last September.
The 405,756 sq ft site in Tai Po sold for HK$2.13 billion (S$382.6 million) in a tender that closed last Friday, according to the Hong Kong Lands Department website.
The buyer was Asia Metro Investment, a subsidiary of China Overseas Land & Investment.
The plunge in the price of land comes amid weaker appetite from Hong Kong developers against the backdrop of a nearly 11 per cent drop in housing prices since their September high, according to the Centaline Property Centa-City Leading Index.
In January, sales of new and secondary homes reached their lowest monthly level since Centaline started tracking data in January 1991.
Hong Kong home prices surged 370 per cent from their 2003 level through the September peak before the correction began, spurred by a rising supply of housing and a slowdown in China.
Lower prices paid for land could eventually lead to cheaper home prices down the road, and are viewed as a leading indicator of the negative sentiment on the market.
Adding to the downward pressure on prices was the government raising its five-year target for new housing supply to 97,100 new homes on Jan 13, up from a previous estimate of 77,100 units.
Ratings agency S&P has forecast an average home price drop of 10 per cent to 15 per cent in Hong Kong this year, but added that the industry could withstand much worse. "The biggest risks are a weaker or continued decline in the Hong Kong economy and a severe China slowdown," said S&P director of corporate ratings Cindy Huang, adding that there could be an additional 5 per cent drop in average home prices in 2017.
Recent land sales have been dominated by mainland Chinese developers. Hong Kong property companies have been less active as they are struggling to sell existing units in their inventories and offering discounts to entice new buyers.
Ms Nicole Wong, head of property research at CLSA, said mainland companies are outbidding their Hong Kong counterparts because they expect lower margins and are anxious to park money offshore given the devaluation of the yuan.