Michael Wong, Secretary for Development, hopes to tame land prices by new land sale rule
Hong Kong is learning from its all-time rival Singapore as it seeks to tame the city’s land prices. In addition to the tender amount of the successful bidder in land sales, the Hong Kong government will now publish the amounts of all failing tender submissions, announced Secretary for Development Michael Wong in a media briefing for land sale programme in the new year.
Under the city’s previous land tender system, only the winning bid is revealed while the amounts of other bids submitted were not disclosed. Starting from April, after all transaction procedures for the successful bid are completed, the government will publish the amounts of the other tender submissions, though without identifying who made which offers.
The rule change is designed to enhance transparency, similar to Singapore’s practice of publishing an anonymous list of all tender amounts submitted.
2018 Land Sale Programme Tries to Tame Property Bidding
Hong Kong’s Kai Tak area provides three commercial sites for tender
“In the past, there are quite, several sites, where the winning bid far exceeds the upper estimate of the market. In those situations people wonder whether the winning bid is representative of the overall bids received or is an outlier representing only itself, whereas the second or third highest bid falls far behind,” said Michael Wong, Secretary for Development in the media briefing. “In view of the uniqueness of the property market, we think it may be a good time to increase the transparency of the market.”
The new measures have received positive feedback from the market. “With the introduction of a new transparent system, showing all the bids, we expect it would avoid overly aggressive biddings on land prices, as the market will have the full picture of developers’ attitudes to land acquisition,” said Rita Wong, Head of Valuation at JLL in Hong Kong.
Mainland Bidders Offering 24-50% Over Market
As Hong Kong’s property market has boomed in recent years, developer bids for the city’s scarce land resources have had a tendency to exceed estimates, resulting in “land kings” paying sky-high prices for sites. Chinese developers were particularly aggressive in the last two years. In December 2016, Hainan-based HNA Group won the site Kai Tak Area 1L Site 3, in Kai Tak area for HK$5.41 billion ($697 million), 24 percent to 38 percent higher than the market valuation of HK$2.98 billion to HK$4.38 billion, according to analysts estimates at the time.
Two months later, mainland developers Logan Property Holdings and KWG Property Holding snapped up a waterfront residential site in Ap Lei Chau for HK$16.86 billion ($2.17 billion), a price 50 percent above market expectation.
Hong Kong developers are competitive in land grabbing as well. Last June, Nan Fung Development outbid 11 rivals to win a commercial site in the Kai Tak area for the record-breaking price of HK$24.6 billion ($3.16 billion). The site’s value was estimated to be no higher than $23 billion prior the tender.
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