Commercial site in Hong Kong’s arts hub West Kowloon tipped to fetch as much as US$1.3 billion in tender

The West Kowloon Cultural District Authority has put up for tender a 700,000 sq ft property to be developed into three commercial buildings

Sun Hung Kai Properties and Sino Land are likely bidders for the Artist Square Towers project, according to consultants

Hong Kong’s West Kowloon Cultural District Authority has put up for tender a 65,000 square metre (699,654 square foot) property to be developed into three commercial buildings with office, retail, dining and entertainment components.

The property could fetch a bid as high as HK$10.5 billion (US$1.3 billion), according to one valuation, given that Hong Kong’s tourism is likely to have recovered from its pandemic malaise by the time construction is complete in four to five years. Estimates put construction costs at HK$8 billion.

The project is a “landmark commercial development” to be dubbed the Artist Square Towers (AST) Project, according to the authority.

The plot is located at Artist Square in the West Kowloon Cultural District, a 40-hectare development touted as Hong Kong’s arts and cultural hub. The property lies close to facilities including the M+ contemporary art museum, the recently opened Hong Kong Palace Museum, the Lyric Theatre Complex currently under construction and an 11-hectare Art Park fronting Victoria Harbour.

The deadline for tender submissions is November 14 at 5pm.

“The AST Project is one of the flagship commercial projects of the [area], dedicated to creating a new cultural central business district in Hong Kong,” a statement from the authority said. “It will provide the private sector with a precious opportunity to take part in such an ambitious arts- and culture-led development.”

The winning bidder will have the development and operational rights of the AST Project for 47 years under a build-operate-transfer (BOT) model, unlike the usual 50-year grant given to the winning bidders of other land tenders in Hong Kong.

The site is adjacent to the commercial and residential area above Kowloon Station, which is a stop for the Tung Chung and Airport Express lines, and close to Hong Kong West Kowloon Station, which is the terminus and only station on the Hong Kong section of the Guangzhou-Shenzhen-Hong Kong Express Rail Link.

“The project will have good prospects in the long term, as after the opening of the Palace Museum, M+ and other facilities, the district will become a true cultural hub with a strong market position,” a property agent said. “Once the office and retail development is completed, the West Kowloon area will be another business hub [that is] even larger than the Quarry Bay island east hub.”

The foundation and basement car parking facilities in the district have already been built, the agent said, meaning lower costs and faster construction for developers.

“The project will be suitable for end users like large corporates looking for exclusive use of the building with a good naming-rights signage facing Victoria Harbour,” the agent said.

Sun Hung Kai Properties, which won the commercial parcel above the West Kowloon terminus, is likely to be interested in the project, as is Sino Land, which is part of a consortium that built the Grand Victoria residential project in southwest Kowloon. Sino Land also owns the China Hong Kong City commercial complex in neighbouring Tsim Sha Tsui district, which includes five office towers, a shopping centre, a hotel and a ferry terminal, a surveyor said.

“Developers will have a concern about the uncertainty with the 47-year model, as ordinary land grants in Hong Kong give the winning bidder a 50-year lease term and upon expiry, they only need to pay 3 per cent of the weighable value of the land,” the surveyor said.

Another concern is that since the authority managing the district is a statutory body, the winning bidder will have to deal with the Hong Kong government plus the authority, the surveyor said.

The surveyor estimates that the land and construction costs for the property at about HK$11 billion.

“This project is slightly different from a regular government tender site, as it is tendered under the BOT procurement model,” another surveyor said. “The total land value could reach HK$10.5 billion.”

“Taking into account the prominent future of the West Kowloon district, by the time the development is completed, it is likely to be after four to five years,” the surveyor said. “The pandemic should have hopefully vanished and the tourism industry should have recovered.”

(South China Morning Post)

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Hong Kong confronted by bleak outlook, with banks’ record high borrowing costs set to hit property market, economy

The one-month Hibor hit a 29-month high on Friday, while three-month Hibor was close to a 14-year high

An increase in the Hibor is set to force banks to increase prime rates this month, Everbright Securities analyst says

The interest rates Hong Kong’s banks charge each other for borrowing money have hit new highs and are expected to drive up their funding costs.

The one-month Hong Kong Interbank Offered Rate (Hibor) – the benchmark for mortgage loans – rose to 2.01 per cent on Friday, a 29-month high, according to a mortgage broker. The three-month Hibor, the benchmark for corporate loans, climbed to 2.79 per cent, nearing a 14-year high.

The one-month Hibor stood at only 0.15 per cent at the beginning of this year, while the three-month rate was at 0.25 per cent. The mortgage broker said that it expected both to rise further this year.

A widening interest-rate gap between Hong Kong and the US has contributed to a flight of capital out of the Hong Kong dollar market and has increased funding costs at banks in the city.

The US Federal Reserve has increased interest rates four times since march to control inflation. Last month, it increased interest rates by 75 basis points for a second straight month after US inflation topped 9.1 per cent in June and was well above its 2 per cent target. The Hong Kong Monetary Authority (HKMA), the city’s de facto central bank, has moved in lockstep with the Fed to help maintain the peg between the US dollar and the local currency.

The banks will, as a result, be pressured into raising their prime rates, the interest rates charged on loans made to private individuals and companies, this month after the Fed raises its rates for a fifth time this year on September 22, analysts said.

“Banks have, so far, not followed the US rate rises but an increase in the Hibor, which adds to banks’ cost of funding from the interbank market, is set to force them to increase their prime rates in September,” analysts said.

The aggregate balance – the sum of balances in clearing accounts maintained by banks with the HKMA – has fallen to HK$124.92 billion as of Friday, 63 per cent lower than the HK$337.53 billion in May, before the HKMA first intervened this year. The authority has intervened 31 times this year to support the currency peg, buying a total of HK$213.096 billion and selling US$27.15 billion US dollars.

The HKMA increased its base rate by 75 basis points to 2.75 per cent in July, in lockstep with the US Fed. The interbank interest rates followed suit – 12 banks have already raised the cap for Hibor-linked home loans, according to a mortgage broker.

However, HSBC and Bank of China (Hong Kong), two of Hong Kong’s three currency-issuing lenders, have kept their prime rate unchanged at 5 per cent. Standard Chartered, the third currency issuer, has kept its rate steady at 5.25 per cent.

But Banks will raise their prime rates by 25 basis points this month, followed by another 25 basis points by the end of 2022, said Kenny Wen, head of investment strategy at Hong Kong-based broker KGI Asia.

“The rise in the prime rate will increase borrowing costs including mortgage lending. That will bring a negative impact on home buying desire and hold back the economy as we have already recorded two quarters of negative GDP growth,” he said.

A customer with a 30-year HK$5 million loan will have to pay HK$656 more each month following a 25 basis points increase and HK$1,324 more following a 75 basis points increase, according to the mortgage broker. Should the prime rate rise a full-percentage point, this homeowner will see monthly repayments increase by HK$2,004.

The city has fixed-rate mortgages too, but most mortgages are linked to either the one-month Hibor or banks’ prime rates. Because of low interest rates since 2008, most homebuyers have opted for either Hibor or prime rate mortgages as it has been cheap. Fix rated mortgages become popular when interest rates are high or on a rising trend.

The ratio of new mortgage loans priced with reference to Hibor stood at 96.8 per cent in July 2022, according to HKMA data. New loans priced according to prime rates stood at 1 per cent, while fixed-rate mortgages stood at 0.1 per cent. The other 2.1 per cent were linked to other benchmarks that the authority did not elaborate upon.

“Hong Kong has entered an interest rate hike cycle. Homebuyers should evaluate their ability to afford a home before they make a purchasing decision,” a property agent said.

“But there is real demand and they are looking for bargain deals,” the agent said, adding that property market activity in Hong Kong will continue to slow down.

Home prices in the city fell by 1.6 per cent in July, sinking to nearly a two-and-a-half-year low amid rising interest rates and Covid-19 rules that continue to weigh on the city’s economy and the property market.

The closely watched weekly market index shows that on Friday secondary home prices at 130 housing estates fell to 171.83, their lowest level since the week of February 17, 2019.

An increase in prime rates would hurt the macro economy, an independent currency analyst said. Banks last raised their prime rates in September 2018, by 12.5 basis points.

(South China Morning Post)

宏安北角項目總投資逾29億

宏安地產夥拍管理荷蘭最大退休金的資產管理公司匯集基金 (APG)，早前透過收購股權形式，斥資13.38億購入港島英皇道101號及111號地塊，宏安透露擬發展為以兩房及三房單位為主的住宅項目，預期項目的總投資額將超過29億。

該項目位於英皇道101號及111號，佔地面積約12695方呎，賣方為旭輝地產202006有限公司，分別由旭輝控股及宏安地產持有60%及40%股權。宏安表示，項目地點鄰近港鐵炮台山站，鄰近北角商業區及銅鑼灣維多利亞公園，周邊交通及配套設施完善，是港島東傳統住宅區的罕有大型地盤，地理位置優越，是次購入該地塊，土地成本不高於每方呎15000元。

宏安將運用其於舊區重建項目及開發特色時尚住宅的經驗，打造該樓盤項目，並計畫以兩房及三房住宅單位為主，預期將於2026年落成，總投資額將超過29億。

財團底價2.1億購高街舊樓

此外，由財團併購的西營盤高街124及126號紹德樓，昨日進行強拍，最終以底價2.1億拍出。該物業位處西營盤高街南面，毗鄰英皇書院，現為一幢8層高商住樓宇，地盤面積約2799方呎。

有代理表示，由於投得上述項目的財團於鄰近另有一個項目等待批准強拍，現時不能透露項目的發展計畫，但不排除會合併發展。

(星島日報)