Update on up-and-coming Tung Chung area

Posted by drbubb (667 days ago)

[b]TUNG CHUNG AREA of Hong Kong ==[/b] update: Dec. 2006

Here's an update for the area of HK where I am presently living. Tung Chung is on Lantau Island, at the end of the MTR. This area of the Tung Chung coast over looks the airport, and longer term should be expected to benefit from developments on Lantau Island, such as airport expansion and the completion of the long HK to Macau bridge which is expected to be completed in 2010-12.

At the moment, there is an overhang of supply, from buildings which have been almost completed, but have not yet been released for sale. There are three main developments, Caribbean Coast, Coastal Skyline, and Seaview Crescent. All three are JV's between various developers and the MTR, which owns the land until the current SAR regime with China comes up for renewal in 2047. The first two developments each have two towers which were delayed for release due to poor sales- see below.

Coast Skyline Towers . : Development around Tung Chung MTR ; CS is third from left
[img]http://www.mtr.com.hk/eng/properties/images/TUCCoastalSkyline.jpg[/img].[img]http://www.mtr.com.hk/eng/properties/images/tuc.jpg[/img]

La Rossa, the catchy marketing name for the last two towers of the Coastal Skyline development (two on the right, see above) were released for sale in early December. About 380 flats will be sold in each the two towers, A and B. The B Tower is closest to the MTR stop, and has come up for sale first. Prices for a 3BR at a mid-level with a decent view are about HK$3,100 per square foot. (At current exchange rates, that's about Pds.210 per sf.) For those unfamiliar with Hong Kong, these prices are less than 50% of what you might pay for properties of similar standard on Hong Kong island within a similar distance of a major MTR stop.

La Rossa's impending launch has pressure prices at Caribbean Coast where i live at present. Prices dropped from perhaps HK$2,700-2,900 /sf, to maybe HK$2,500-2,700 /sf about six weeks ago. And there may be further downwards pressure if the sales do not go.

I had a look at the show flats today, and it looks like the properties may be a somewhat better standard than CC. Ther views on the harborside are better, and the location in closer proximity to the MTR is better also. One thing I do not liek is that CS lacks shops and restaurants, something that CC does have on its lower floor.

CC is meant to open its last two towers in January 2007, and it will be interesting to see what happens to prices when the competition hits.

HK Property Index
[img]http://202.72.14.202/cci/charts/ccil.jpg[/img]

Overall, I think the HK market is looking a bit toppy, and set for a further correction. But the flats in these towers may represent an opportunity, since they were mostly build before material prices skyrocketed, and once they are absorbed,m there could well be some appreciation of rents, since the MTR rise into central HK is only about 40 minutes, and these properties are of reasonable modern standard.

= = =

One way to look at the pricing is to consider how many years it will take to return an investment at the current rental rates.

ILLUSTRATIVE CALCULATION : Caribbean Coast, small 3BR of 1,000 sf, about 840 sf net:

Rental p.a.... : $HK8,500 x 11.5 = $97,750(note: we pay $8,000/mo, which is not so easy to achieve now)
Maintenance. : $1.60 x 1,000 sf = $16,000
Annual Net... : HK$ 81,750
Approx Price : HK$ 2,600,000
Net Yield...... : 3.14 percent // mislead due to lease of only 40 years
Years to pay : 31.80 years
Return at 40 : 25.8%, at zero interest rate

RENTS are too low at present to make this of much interest, unless one wants to bet on a cheap renewal at 2047- a reasonable assumption perhaps

MORE like this: http://www.greenenergyinvestors.com/index.php?showtopic=920

Find what you are after in our Hong Kong A-Z Directory

Posted by Jiji (654 days ago)

We had a look at this propery two days back and found it is ok. We intended to use for own residence as we rent apt in island at about 14000 per month. But we see a problem with kids education as we have two kids studying at the moment. I heard there is a lack of school facilities there.

Posted by dizzydog (650 days ago)

drbubb, i don't suppose you know what they are building on that huge grassy knoll in front og CC, CS & SC do you? it didn't take the diggers very long to get rid of all that greenery

Posted by drbubb (648 days ago)

Jiji,
These buildings are suurounded by schools- three within 2-5 minutes walk.

DD,
The grassy knoll, as you call it, will be built up, probably within 3-5 years. i understand the plans are already underway. The towers will reportedly get taller, as they move towards hk, away from the airport. Much of LaRossa, and Coastal Skyline will keep its views. And also the higher floors on the higher numbered towers at cc.

An issue worth thinking about, but it still does not elminate the argument in favor of (cheap at under $3,000-psf) properties at Tung Chung being a great long term investment.

Why not visit: the Hongkong property thread:
http://www.greenenergyinvestors.com/index.php?showtopic=920
and comment there too, so we can build up a dialog on both sites.

Posted by drbubb (601 days ago)

for those interested in fundamentals, consider:

SOME BULLISH POINTS from Today's Hong Kong Press

+ HSBC set to Spark martgage War- (Front Page Headline)
.. HSBC dropped its mortgage rate to 4.87 percent from 5.00, plus a cc-spending rebate of 0.88%
Ina survey by Ricacorp, 46 percent of 100 buyers said the rate cut would speed up peoples' buying plans.
(note: HSBC has the largest market share at 17.6 percent, with BOC at 15.9%, HangSeng at 13.8%)

+ Investment banks see upturn in home sales (Standard. pg.A6):
.. Thanks to: wealth effect of buoyant stock market, and wage rises... plus strong RMB, low deposit rates.
Also: "from now until 2009 there will be a severe imbalance between deamnd and supply (in residential market)
The deleivery of flats will fall from 35,000 units in 2002, to 12,000 in 2009, while the market absorbed 24,521 units
in the period 1998 to 2003. Andrew Look of UBS said.

+ Rates forecast to hit 12-year lows- (Property-P3-Stan.)
.. Real interest rates, or the interest rate minus the prevailing inflation rate are likely to fall to about 1.5 percent this year, a 12-year low. This compares with an average of 3 percent last year

Posted by elysium168 (200 days ago)

what is the forecast on prices in tung chung area? seems like prices are already peaking in developments like carribean coast (?)