Prices of Hong Kong's homes are becoming more polarised, with a growing gap between luxury and mass market apartments, marked by the scarcity of land for high-end developments and government policies focused on boosting the supply of small flats.
The government's rejection of a developer's attempt to trigger an auction for a piece of land in Kau To Shan, Sha Tin, is indicative that the administration does not want to sell valuable land at low prices. The 212,051 sqft site, with a developable floor area of 318,076 sqft, was estimated to have a value of HK$2.2 billion to HK$2.5 billion.
In the mass market, the tender for a residential project above West Rail Nam Cheong Station was awarded to Sun Hung Kai Properties after a winning bid of HK$11.8 billion, representing an average cost of HK$4,468 per square foot, lower than market expectations of HK$5,500 or above. This was apparently related to a restriction that most units should not exceed 500 sqft, plus the project's large scale of about 3,300 units, reflecting a more cautious attitude towards the mass home market.
Marcos Chan, head of research for the Greater Pearl River Delta at Jones Lang LaSalle, says both luxury and mass housing prices have surged sharply since the market trough in 2009. Luxury prices have risen by 82 per cent, while mass market prices have increased 73 per cent.
'The price gap between luxury and mass homes is probably at a record high today. Prices of high-end properties are rising faster given their limited supply and strong demand, and this is especially true for new luxury residential projects in the primary market,' he says.
'Super-deluxe properties are often selling at sky-high prices. The price gap between luxury and lower-end properties is expected to widen. Even if the market turns south, the luxury sector will be more resilient and the likely correction will be smaller than in the mass market.'
Super-deluxe houses have continued to set record prices, undaunted by the softened market environment. In August, an 8,300 sqft house at Pollock Path on The Peak was sold for about HK$800 million, representing an average price of about HK$96,000 per square foot.
