A land premium settlement concluded between Cheung Kong (Holdings) and the government that paves the way for the development of its 258,000 square foot site could signal a turn in the tide for housing supply, say analysts.
Cheung Kong reportedly agreed to pay about HK$530 million, or HK$2,050 per square foot, to obtain the right to develop the site adjacent to its completed Banyan Garden project in Lai Chi Kok.
'That represents a good price for Cheung Kong,' said CCB International Securities executive director of research Adrian Ngan Wai-hung.
'It's obvious the government is softening its stand to quicken land premium transactions to encourage more development.'
Eric Wong, a property analyst for Swiss investment bank UBS, said he now expected to see more land premium transactions being settled.
'Considering the recent property rally and the risk of an asset bubble forming if private land supply remains artificially suppressed, we expect the Lands Department to soften its stance on minimum land premiums,' he said.
Driven partly by shortages and revived sentiment, residential prices have risen by about 20 per cent so far this year, according to the Centaline City Leading Index. But against this background of strong demand, only a small site in Sheung Shui has been sold this year through government auction, for HK$305 million.