Hong Kong property sector leaders have voiced their support for a minister’s decision not to bring back an abolished application-based land sale mechanism, warning it might sour developers’ appetite amid an underperforming market.
Secretary for Development Bernadette Linn Hon-ho said earlier on Monday that authorities had no intention of restoring the previous land sale mechanism.
Abolished in 2013, the mechanism required developers to apply for sites listed by the government and offer a minimum price. Authorities would then put the land up for sale by public auction or tender.
The current system sees the government put up plots for tender each quarter, subject to market demand.
Stewart Leung Chi-kin, chairman of the Real Estate Developers Association of Hong Kong, later on Monday said: “When the market is not performing, it is not the right time to use the land sales by the application mechanism.
“Maybe developers will hope to apply for their preferred sites but it will affect their sentiments if their applications fail.”
Leung said most developers currently showed little interest in buying more land as they still had existing projects on the go and numerous unsold flats.
Official figures show 14,200 private flats are currently under construction as of June, while developers have yet to sell about 19,000 homes.
Some property sector leaders earlier this year suggested bringing back the abolished mechanism to reduce the risks of the government withdrawing its tenders.
Authorities previously cancelled tenders for two of the five residential plots made available up in the 2023-24 financial year as the premiums offered had not met its reserve price.
But minister Linn told local media on Monday that the government was committed to taking the lead in providing a stable land supply.
She said the public could develop pessimistic market perceptions if the mechanism was restored but developers opted to take a conservative stance and not take part.
Linn added that the government would not necessarily roll out all the residential plots on its programme this year if the private sector could provide sufficient supply.
She also said the government had to consider the market and assess developers’ intention to bid, citing a need to avoid negatively affecting property prices at a district level.
The minister said the market was waiting on an anticipated interest rate cut by the United States and had been less active in the first two quarters of the current financial year, which ends next March.
The land sale programme for the current financial year has eight residential sites, with one sold last month and another scheduled to go up for tender in the second quarter.
Lau Chun-kong, the managing director of Colliers Hong Kong, a real estate service and investment company, said he agreed with Linn’s stance against restoring the past land sale mechanism.
The veteran surveyor said the mechanism would require developers to prepare applications with no guarantee of success.
Lau also said the government would lose its power to establish land supply under the former mechanism, adding it should continue with the tender-based system while observing market appetite.
He added that authorities could roll out small residential plots to gauge sentiments, before putting up more sites if the reception was positive.
