Hong Kong Government Land Auction Results Show Booming Real Estate Market

Results in a Hong Kong government land auction showed a surge in interest in real estate. That, as well as an apartment sale announced on Sunday, is giving the government concern over a superheated real estate market.

The apartment sale involved developer Sun Hung Kai. Sun Hung Kai sold 900 apartment units in a major new residential complex over the weekend for a total of $541 million.

Selling for a major premium over other units in the area, the units range in size from 400 to 1,400 square feet. They sold for about $700 per square foot.

Interesting, Sun Hung Kai poured that money back into a major land grab. It was they that bought the land at auction, agreeing to pay a $434 million bid for a 130,000-square-foot site in the Hong Kong suburbs.

The sales price was well above the reserve price for the site. In fact, it was 69 percent above the reserve price of $258 million.

In what may be fears fueled by the mortgage crisis and housing bubble seen in the U.S. during the Great Recession, the government is working to reduce fears of a real estate bubble. As it has been noted that in some regions home prices have risen as much as 25 percent in the past 12 months, with land values in some areas doubling, beginning Thursday, the People's Bank of China will require banks to hold more cash. This should, the theory goes, slow down excessive lending.

In addition, it's expected that Hong Kong's financial secretary will announce a policy response Wednesday, to quell the fears. Keith Yeung, a property analyst at Mirae Asset said, "The government is now under tremendous pressure to intervene in the Hong Kong residential market."

Written by Michael Santo
HULIQ.com

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