Hong Kong’s government has reportedly approved the first-phase land premium for the city’s Yau Tong Bay project, with the cost exceeding HK$4.4 billion, or over HK$3,000 per square foot, a level seen as too steep for developers to accept.
The project, jointly developed by six major developers including Henderson Land (0012), Sun Hung Kai Properties (0016), and Wheelock Properties, has decided to divide the 4.08 million-sq-ft development into four phases and applied for land premiums separately, following over four years of stalled negotiations without reaching a deal.
The development, expected to yield 6,236 residential units, is one of the largest projects in recent years, comparable in scale to half of Taikoo Shing in Quarry Bay.
The approved first phase comprises a mixed-use commercial and residential development with a gross floor area of about 1.477 million sq ft, including around 100,000 square feet of non-residential space.
Still, the developers are unlikely to accept the terms, as the price remains elevated compared to other deals in the district. In a 2023 case, Yuexiu Property (0123) paid HK$1.35 billion for a nearby site with a premium averaging just over HK$2,000 per sq ft.
The government made its fourth offer for the full project last September, proposing a premium of HK$15.9 billion, or about HK$3,900 per sq ft, a figure not far from the latest phase-one rate.
The developers had originally planned to develop the site in eight to ten phases, but no agreement has been reached since the government’s first offer in December 2020, due to concerns over high costs, extended timelines, and heavy interest expenses.
Initial development costs for the first phase, including land premium, construction and interest, are estimated to average HK$14,500 per sq ft of saleable area, and future phases could cost even more.
Therefore, the developers opted to divide the project into four stages, aiming to expedite the land premium approval process and reduce development risk by avoiding a lump-sum payment of the full premium.
STAFF REPORTER
