Hong Kong: The Hong Kong government sold a plot of land at a price far lower than estimates, with local developers describing the transaction as the clearest sign yet of a correction building in the world's most expensive residential property market.
The 2.3-hectare site in the luxury Kau To Shan residential area only attracted one bidder offering the minimum price of HK$5.5 billion (Dh2.6 billion) on Tuesday, compared with surveyors' pre-sale assessments ranging between HK$7.25 billion and HK$9.25 billion, according to a Bloomberg survey. This came as average sale prices had slipped 2.5 per cent from May's post-Asian financial crisis peak, according to Midland Realty's property index.
The city was rated the world's most expensive place to buy a home, according to a recent survey by property agency Savills, with private homebuyers paying around US$750 (Dh2,754) per square foot ($69.70 per square metre) of space for an entry-level apartment.
An average home costs 11.4-times median household income, compared with 5.1 in the UK and 3.3 in the US.
The government has reacted to rising public anger over housing prices by announcing executive measures to cool prices and selling more land in recent months. It is also expected to resume building subsidised housing. But prices have proved resilient despite a relentless property boom which sent prices rising 80 per cent since the beginning of 2009, as demand continues to far outstrip supply and cash-rich mainland Chinese buyers remain keen buyers of luxury flats in Hong Kong.
The enthusiasm seen in recent land sales was notably absent in Tuesday's auction and it is expected to send shockwaves through the property market, coming when the local stock market was reeling from the global fallout from the US rating downgrade and Eurozone debt crisis. The Hang Seng index dropped 5.7 per cent on Tuesday.
Andrew Lawrence, property analyst at Barclays Capital who had been predicting a 25 per cent to 30 per cent drop in prices next year, said it was rare for a land sale to attract so little interest, and rarer still for the government to accept the first bid without threatening to withdraw the sale.