21 December 2016 - Despite the reporting of possible delays in engineering works back in September, the MTR South Island Line is scheduled to open on December 28th this year. The new train line which extends from Admiralty to South Horizons in Ap Lei Chau, serves to link up new stations in the southern part of Hong Kong including Lei Tung, Wong Chuk Hang and Ocean Park. This project is expected to serve up to 170,000 people a day, and significantly reduce the transit time between Ap Lei Chau and Admiralty from an hour to 11 minutes, bypassing the Aberdeen Tunnel which often acts as an early morning chokepoint for harried commuters. More pertinently, the time savings and convenience resulting from the development of the South Island Line translates into a renewed interest in residential and commercial real estate in the surrounding areas.
The southern district houses over 350,000 residents and employees. Although a portion of residents from Shouson Hill and Sham Wan Towers expressed initial concern over potential noise and scenic pollution from the over ground section of the South Island Line, the vaunted ‘MTR effect’ - whereby new railway infrastructure caters to property capitalization opportunities, is projected to be a boon for local residents.
Relying on precedence, according to JLL, the anticipation of the new Kwun Tong MTR Line extension in October this year led to an upsurge of 95 per cent and 80 per cent of residential property values in Whampoa and Ho Man Tin respectively. Looking to the Southern District, since 2010, residential property prices in Aberdeen and Ap Lei Chau have shot up by 63 per cent and the current average price per square foot stands at HK$8,865 as of July 2016. The vote in confidence for the Southern District’s residential property market is also reflected by a string of new developments.
Launched between the period of 2010 and 2014, prominent new residential developments in the area include Larvotto by Sun Hung Kai properties, H Bonaire by Henderson Land and Marinella by K. Wah. Despite the influx of new property units, this is unlikely to exert a downward pressure on overall property prices in Hong Kong because of the persistent demand for residential property which effectively undercuts available housing supply. Though the opening up of a new MTR station usually heralds a substantial price surge in second-hand properties in the area, the price uptick in the Southern District is projected to be relatively subdued, increasing only 5 to 10 per cent due to the Government’s introduction of additional stamp duty measures in November.
According to JLL’s research data, Hong Kong Island has a 2 per cent vacancy rate in terms of commercial properties. Now only 10 minutes away from Central via the South Island Line, Wong Chuk Hang has the latent potential to become a viable commercial hub. New commercial developments are already poised to transform the historically industrial area. Real estate giants such as Sun Hung Kai Properties, Swire Properties and Henderson Land, have projects within the area that are either completed or under development. Completed in 2011, One Island South, which was co-developed by Henderson Property, was priced at HK$13,000 per square foot.
It is important to note however that the convoluted structure of legal ownership of neighboring plots of industrial land presents significant challenges to real estate development. Unlike East Kowloon which was designated as a Central Business District in Hong Kong, demand for commercial real estate and office spaces in Wong Chuk Hang could yet prove more niche, catering to medium business enterprises and tenants in search of back office space. With commercial property valuations projected to increase by 5% after the South Island Line goes into operation, by that merit alone, Wong Chuk Hang could ultimately draw considerable commercial interest due to the steep office rental prices across Hong Kong Island.