MTR receives no ‘conforming tender’ for Tung Chung site in latest setback for Hong Kong’s property market outlook
- Company received no conforming tender for proposals to develop its Tung Chung site on Lantau Island, despite attracting 32 expressions of interest
- The lack of proposals suggests the base price set by MTR is unattractive, CHFT Advisory and Appraisal says
MTR Corp has failed to entice Hong Kong property developers to jointly develop a large-scale mixed-use property project in Tung Chung near the city’s international airport, a week after the government failed to sell another site in the vicinity.
“We have not received any conforming tender for the development,” the company said in a statement after the bidding closed at 2pm local time on Thursday. The proposed development on the site known as Tung Chung Town Lot No 53 had earlier attracted 32 expressions of interest from potential bidders when invitation closed on October 6.
MTR sought proposals for Package One of the Tung Chung East Station Development on Lantau Island, which comprises residential and retail components and is scheduled to be built in phases through 2029.
“The lack of proposals for the project suggests the base price set by MTR Corp is unattractive” to prospective investors, said Alex Leung, senior director at CHFT Advisory and Appraisal. An abundant supply of land bank in the area in the near future may have also diminished its appeal or appreciation potential, he added.
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The setback reflects the uncertainty and medium-term visibility of Hong Kong’s housing market outlook. A succession of interest-rate increases by the Federal Reserve and the Hong Kong Monetary Authority since March 2022 has pushed financing costs to the highest level since 2007, denting home prices in the city along the way.
Hong Kong’s government rejected all four tenders for a 10,648-square metre residential site in Tung Chung on November 1, saying the bids fell short of its reserve price. Analysts also cited the lack of confidence in the market outlook. The government had failed to sell the site in four previous attempts.
Package One of the Tung Chung East Station Development is located at the southeastern part of the site opposite the future rail station. The maximum residential gross floor area is 64,650 square metres, while the commercial gross floor area is limited to 8,133 square metres.
The project will be conveniently served by the proposed station on the Tung Chung Line Extension, which is under construction and also targeted for completion in 2029, MTR said.
Midland Surveyors estimates the first package could provide 1,200 flats, with a minimum selling price of HK$2,000 (US$256) per square foot for the parcel. On that basis, the site could be valued at about HK$1.57 billion, it added.
“While MTR residential projects offer good amenities and access, the current high interest rates and expensive construction costs cannot support the overall project’s return,” said Hannah Jeong, head of valuation and advisory services at Colliers Hong Kong.
The opening of Tung Chung’s new rail station is still some years away, so property developers have found no urgency to participate under the current uncertain market conditions, with many cautiously biding their time, she added.
That caution has persisted since MTR also scrapped a tender in February for the Oyster Bay residential site, also on Lantau Island. The latest failure indicates the Oyster Bay project, as well as other sites in Tung Chung East, may struggle to relaunch or sell in the future.
