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Hong Kong property
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Hong Kong government to net record US$6.4 billion in land premium amid rising demand and prices of homes

  • The government had already generated HK$40 billion – the current full-year record – in the first 10 months of 2021, Paul Chan says
  • Developers and landowners to increase land banks and undertake redevelopment after the roll-out of the Northern Metropolis plan, Knight Frank executive says

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The northern area of the New Territories. The government’s strong vision on housing supply and the Northern Metropolis development will encourage local developers to look for residential development opportunities, according to an analyst. Photo: Martin Chan
Sandy Li

The Hong Kong government is set receive a record HK$50 billion (US$6.4 billion) in land premium this year, as developers rush to build flats to capitalise on a housing shortage that is fuelling prices and demand.

Land premium is the fee that developers pay to the government when a modification or change in land use results in a higher land value. The government had already generated HK$40 billion in land premium in the first 10 months of the year, Financial Secretary Paul Chan Mo-po said this month. This matches the current record for the whole year reported in 2017, according to property consultancy Knight Frank. Last year, the government earned HK$12.7 billion.
“It is likely that developers and some existing landowners will feel that they have the incentive to increase their land banks, or undertake redevelopment through land premium settlements with the government in the coming one to two years – especially after the roll-out of the Northern Metropolis framework,” said Martin Wong, director and head of research and consultancy for Greater China at Knight Frank, which said the government could earn between HK$45 billion and HK$50 billion in land premium this year.

Demand remains strong in Hong Kong, the world’s most expensive property market, and developers looking to tap it are looking for ways to increase their land holdings amid limited supply. The Northern Metropolis proposal has, for instance, encouraged them to convert farmland for residential use.

“More non-residential use plots in urban areas will be converted for residential use as a result of the supply shortage,” Wong said.

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Hong Kong finance chief says Hongkongers can take part in financing of Northern Metropolis

Hong Kong finance chief says Hongkongers can take part in financing of Northern Metropolis

There are various ways for developers to step up in the residential market, such as land sales, the redevelopment of older tenement buildings in urban areas, the conversion of agricultural land for development and participation in land share schemes, according to Colliers.

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