HK govt fails to award $4 bln property project

HONG KONG May 28 (Reuters) - Hong Kong's government has decided not to award the tender for a HK$33 billion ($4.24 billion) housing project, suggesting that the city's real estate market is continuing to stagnate under government measures to curb speculation.

Nam Cheong Property Development Ltd, the project company set up for the tender, announced the decision on Friday for the West Rail Line Nam Cheong Station Property Development.

Hong Kong's three biggest property developers Sun Hung Kai Properties (0016.HK), Cheung Kong (Holdings) (0001.HK), and Henderson Land (0012.HK) submitted bids.

Analysts said the likely reason for the withdrawn tender was that developers' proposals valued the land at a lower price than the government had hoped for.

"This sends a negative signal to the market and reflects the fact that the land cost is (too) high," said Cusson Leung, an analyst at Credit Suisse.

The Lands Department would impose a land cost of HK$13 billion for the first phase of the project, local media reported.

Since April, when the government imposed measures to prevent property speculation, including a higher stamp duty on luxury apartments and boosting land supply, developers have become cautious and less willing to pay high prices for land.

The government's recent land auctions met a tepid response, with investors buying the sites at lower-than-expected prices. [ID:nTOE64A05G]

The land for the housing project is owned by the government. MTR Corp (0066.HK), which manages the city's rail transport network, is responsible for its management.

Property prices in Hong Kong have risen about a third since January last year, fuelled by exceedingly low mortgage interest rates, an influx of foreign capital into Hong Kong real estate and low housing supply.

Leung said he expected the city's housing prices to fall 5-7 percent from currently levels. ($1=HK$7.786)