Valuer Insights
Investing in the Future: Crossroads for Developers on Residential Land?
By Valuation and Advisory Services
February 27, 2025
Contact
Angus Luk
Senior Director, Valuation & Advisory Services, Hong Kong
The land in Area 106B of Tung Chung, which remained unsold in 2023, has now seen positive developments. The Lands Department announced on February 19 that the tender for Tung Chung Town Lot No. 55 (TCTL 55) in Area 106B has been awarded to Land Castle Limited (a subsidiary of Sun Hung Kai Properties Limited) on a 50-year land grant at a premium of HK$602 million. This results in a floor price of approximately HK$1,501 per square foot, reflecting a nearly 40% decrease from the HK$2,704 per square foot price of Tung Chung Town Lot No. 36 in Area 55A, sold on July 28, 2011. In January. Tung Chung Town Lot No. 55 has a site area of about 10,648 square meters and is designated for private residential development. The minimum gross floor area is set at 22,361 square meters, while the maximum gross floor area is 37,268 square meters. According to the land sale regulations, the successful bidder must conduct a noise assessment at their own expense and ensure project completion by September 2030. Notably, this plot was previously tendered in 2023, receiving four bids by the October deadline but ultimately remaining unsold.
Source: Planning Department
According to media reports, the successful bidder indicated that the project will primarily focus on small to medium-sized units, with a total investment anticipated to be around HK$3.5 billion. The site boasts a sea view, offers ease of design, and is conveniently located near the MTR station. With ample living amenities expected to develop nearby, along with government adjustments to unit numbers, future sales are positioned to be more flexible and responsive to market demands.
This situation suggests that residential prices may have reached a low point, prompting developers to bid conservatively for new land reserves for future use. When comparing the residential market after the acquisition of Tung Chung Town Lot No. 36 at Area 55A in 2011, which was redeveloped into a residential project by 2016, we see a significant transformation. In 2011, the Rating and Valuation Department (RVD) price index stood at 181.1, and by 2016, it had surged to 307.4, marking a 69.7% increase. The project began pre-sales in January 2015, with transaction prices ranging from HK$4.1 million to HK$7.5 million, averaging unit rate of HK$12,000/sq. ft. (on SA).
The price ranges remained largely unchanged when comparing pre-sale prices (2015) to 2024 transaction prices. Despite a significant price surge from 2015 to 2018, the Tung Chung area experienced a price correction amid the social unrest and COVID-19. Given that this area was particularly popular among airport-related workers, such as pilots and flight attendants, the COVID-19 pandemic affected this industry, causing less demand in the Tung Chung area. After the price fluctuations, 2024 transaction prices showed a similar level to those in 2015. This may indicate that the current residential price point is at its lowest, giving confidence to the developer to bid for the site in the Tung Chung area.
Source: Land Registry
The railway has played a crucial role in the growth and transformation of the Tung Chung community. The construction of the Tung Chung Line Extension project commenced in May 2023, marking the first of several new railway initiatives by the MTR Corporation. Set for completion in 2029, this extension will enhance the railway and public transportation network in North Lantau, improving connectivity and supporting sustainable growth for Tung Chung's residential and working populations. The extension will provide approximately 62,100 residential flats for around 184,000 residents, along with 500,000 square meters of office space and 327,000 square meters for retail.
Source: MTRC
The Tung Chung extension will also incorporate office and hotel developments, improving transport times for visitors and attracting more international exhibitors to the AsiaWorld Expo on Lantau Island. The development of Tung Chung Town Lot No. 55 was expected to be completed by September 2030, aligning perfectly with the operational launch of Tung Chung East and West stations.
Analysis of past transaction records shows that the announcement of new MTR stations typically leads to increased property prices in the surrounding areas. For example, prices around the newly opened Sung Wong Toi and To Kwa Wan stations rose significantly after their launch in June 2021.
Sung Wong Toi Station
Prior to the station's opening, some unit rates from developments ranged from HK$18,000 to HK$21,000. Following its opening in June 2021, prices experienced an increase of approximately 4.7% to 10.6%, rising to between HK$19,000 and HK$23,500.
Source: Land Registry, all unit rates on per sq. ft. basis
To Kwa Wan Station
Before the opening of To Kwa Wan Station, some residential units were sold at unit rates of approximately HK$19,000 to HK$23,000. After June 2021, prices increased to around HK$22,000 to HK$25,000, marking a rise of 6.8% to 13.6%.
Source: Land Registry, all unit rates on per sq. ft. basis
As the Tung Chung East Station is poised to begin operations in 2029, it is likely to stimulate private flat prices in Tung Chung and historical data indicates that the opening of new MTR stations correlates with notable price increases in nearby residential properties.
In the past six months, some developers have actively acquired land with one increased their land reserves by approximately 750,000 square feet, averaging a land cost (accommodation value) of about HK$2,400/sq. ft. This demonstrates developers' confidence in the residential market over the next five years.
Source: Planning Department
This situation suggests that residential prices may have reached a low point, prompting developers to bid conservatively for new land reserves for future use. When comparing the residential market after the acquisition of Tung Chung Town Lot No. 36 at Area 55A in 2011, which was redeveloped into a residential project by 2016, we see a significant transformation. In 2011, the Rating and Valuation Department (RVD) price index stood at 181.1, and by 2016, it had surged to 307.4, marking a 69.7% increase. The project began pre-sales in January 2015, with transaction prices ranging from HK$4.1 million to HK$7.5 million, averaging unit rate of HK$12,000/sq. ft. (on SA).
The price ranges remained largely unchanged when comparing pre-sale prices (2015) to 2024 transaction prices. Despite a significant price surge from 2015 to 2018, the Tung Chung area experienced a price correction amid the social unrest and COVID-19. Given that this area was particularly popular among airport-related workers, such as pilots and flight attendants, the COVID-19 pandemic affected this industry, causing less demand in the Tung Chung area. After the price fluctuations, 2024 transaction prices showed a similar level to those in 2015. This may indicate that the current residential price point is at its lowest, giving confidence to the developer to bid for the site in the Tung Chung area.
Source: Land Registry
The railway has played a crucial role in the growth and transformation of the Tung Chung community. The construction of the Tung Chung Line Extension project commenced in May 2023, marking the first of several new railway initiatives by the MTR Corporation. Set for completion in 2029, this extension will enhance the railway and public transportation network in North Lantau, improving connectivity and supporting sustainable growth for Tung Chung's residential and working populations. The extension will provide approximately 62,100 residential flats for around 184,000 residents, along with 500,000 square meters of office space and 327,000 square meters for retail.
Source: MTRC
The Tung Chung extension will also incorporate office and hotel developments, improving transport times for visitors and attracting more international exhibitors to the AsiaWorld Expo on Lantau Island. The development of Tung Chung Town Lot No. 55 was expected to be completed by September 2030, aligning perfectly with the operational launch of Tung Chung East and West stations.
Analysis of past transaction records shows that the announcement of new MTR stations typically leads to increased property prices in the surrounding areas. For example, prices around the newly opened Sung Wong Toi and To Kwa Wan stations rose significantly after their launch in June 2021.
Sung Wong Toi Station
Prior to the station's opening, some unit rates from developments ranged from HK$18,000 to HK$21,000. Following its opening in June 2021, prices experienced an increase of approximately 4.7% to 10.6%, rising to between HK$19,000 and HK$23,500.
Source: Land Registry, all unit rates on per sq. ft. basis
To Kwa Wan Station
Before the opening of To Kwa Wan Station, some residential units were sold at unit rates of approximately HK$19,000 to HK$23,000. After June 2021, prices increased to around HK$22,000 to HK$25,000, marking a rise of 6.8% to 13.6%.
Source: Land Registry, all unit rates on per sq. ft. basis
As the Tung Chung East Station is poised to begin operations in 2029, it is likely to stimulate private flat prices in Tung Chung and historical data indicates that the opening of new MTR stations correlates with notable price increases in nearby residential properties.
In the past six months, some developers have actively acquired land with one increased their land reserves by approximately 750,000 square feet, averaging a land cost (accommodation value) of about HK$2,400/sq. ft. This demonstrates developers' confidence in the residential market over the next five years.