Hong Kong government to sell only 1 plot this quarter, putting revenue target of US$10.8 billion from land sales out of reach
- The site coming up for tender is a 1.9 hectare parcel in Cheung Sha in Lantau, New Territories, which is expected to yield 110 housing units
- The government has sold only two of the 18 land parcels earmarked for sale in the current financial year, with the proceeds coming in well below estimates
The Hong Kong government will tender only a single parcel of land in the current quarter, which could put its target of HK$85 billion (US$10.8 billion) in revenue from land sales for the financial year in doubt as sales have been scaled down because of poor response.
The site earmarked for tender is a 1.9 hectare parcel in Cheung Sha in Lantau, New Territories, which is expected to yield 110 housing units, Development Secretary Bernadette Linn Hon-ho said on Wednesday.
Three other plots will also be offered for tender – two by the Urban Renewal Authority and one by MTR Corp, in which the government holds the largest stake. These three sites will yield a combined 2,650 flats.
Another seven private developments are also expected to complete their lease modification, which will add 440 housing units, taking the overall supply to 3,200 units from new and existing land parcels, Linn said.
“Together with the land supply in the first half of the financial year, some 10,150 units were supplied in the first three quarters, close to 80 per cent of the full-year target,” Linn said.
The government had sought to deliver 12,800 flats in the current financial year ending in March.
These low bids, however, will not deter the government from making land available for housing, Linn said.
“We will not launch land tenders only when the market is good, we will also tender land when the market is not good,” she said. “Land sales are meant to achieve the target of land supply, and revenue from the land premium is the incidental effect of achieving the target. We have to act in accordance with the policy objective.”
The revenue target from the land premium will always be subject to vagaries of the market, she added.
Linn said the government has decided against tendering any commercial plot in this quarter because of the high commercial vacancy rates in the city, hovering at around 10 per cent.
“It makes sense not to launch commercial sites, to slow down for a while.”
In the third quarter, vacancy rates in Hong Kong’s premium office buildings improved slightly by 0.2 percentage point to 15.8 per cent, equal to 13.6 million sq ft, according to CBRE. That is slightly less than the 14.5 million sq ft total gross floor area of all the buildings in the core area of Central, the city’s main business zone.
The government’s land sales revenue target is unlikely to be met, said Hannah Jeong, head of valuation and advisory services at Colliers Hong Kong, noting that the revenue earned so far is slightly more than HK$7 billion, which is less than 10 per cent of the forecast.
The Cheung Sha site is estimated to fetch less than HK$500 million, she said.
“In the first quarter of 2024, the government will possibly put up for sale commercial sites in Wan Chai and Admiralty as well as three-in-one industrial sites in Yuen Long,” Jeong said.
Besides the impact on government coffers, the decision to slow down land sale activities is likely to be felt by the housing market in the medium term as supply of flats could be affected.
“It is worrying that the government is reserving more land due to the prevailing low prices, which will possibly create a tight supply in five years’ time,” she said.
