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Monday, October 4, 2010

Cemetery site scares off Hong Kong developers

Hong Kong axed its first land auction in 16 years last week after property-mad developers were scared off by the site's location -- next to a cemetery, considered a bad omen by Chinese buyers.

Soaring property prices have sent the financial hub's government into action over the past year, staging half a dozen land sales to boost supply and cool an overheating market amid fears of a housing-price bubble.

The land sales sparked huge interest from buyers, including Hong Kong's richest man Li Ka-shing, given the scarcity of real estate in this densely populated city of seven million.

But the cemetery plot, about 20 minutes' drive from Hong Kong's glittering financial district, was deemed too spooky for the highly superstitious Chinese.

"It's very unusual -- there is always a shortage of land in Hong Kong," said Alnwick Chan, executive director at property consultancy Knight Frank.

"But the (building) would overlook cemeteries.

That is quite an issue for the Chinese population.

It has perceived bad luck and would always have this haunted feeling."The site is surrounded by cemeteries and tombstone workshops, a far cry from Hong Kong's highly prized views of the South China Sea or emerald green hills.

Auctioneers pulled the site after just a few minutes on Tuesday with the plot failing to draw even one bid for its 530 million Hong Kong dollars (68 million US dollars) opening price.

Surveyors had estimated it might fetch as much as 780 million Hong Kong dollars.

On the same day, a site in the city's outlying New Territories fetched a higher-than-expected 459 million Hong Kong dollars, throwing cold water on any suggestion that Hong Kong's property market is softening.

"I believe it's an isolated incident," Buggle Lau, chief analyst at Hong Kong property broker Midland Holdings, said of the failed sale.

"The other site received an overwhelming response.

"The aborted sale was Hong Kong's first since 1994, when a plot of land was also pulled off the auction block after garnering zero interest.

The cemetery site's close proximity to a slope would also hike developers' costs, while its location in a middle-income district might hamper demand for flats in a high-margin luxury building, Lau told AFP.

Worst of all, the upper floors -- which usually fetch the highest prices -- would have the clearest view of the vast cemeteries, he added.

Mainland Chinese buyers, who account for as much as half of the luxury residential sales in Hong Kong, would shy away from investing in the unlucky property, said Yu Kam-hung, a senior managing director at CB Richard Ellis.

"The marketability would be limited," he told AFP.

In August, billionaire tycoon Li snapped up two prime residential sites for a combined 7.61 billion Hong Kong dollars -- well above market estimates.

Developers have remained upbeat about Hong Kong's residential market despite government measures to rein in prices, including boosting land supply and tightening mortgage lending.

Hong Kong house prices have surged nearly 45 percent from their trough at the end of 2008, while prices of some luxury flats have returned to, or surpassed, the peaks of the 1997 property boom.


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