Hong Kong Government Tests Waters With Residential Land Tender After MTR Plot Sale

Following last month’s successful sale of a Lantau Island residential site by MTR Corp, the Hong Kong government plans to relaunch its tender of a nearby plot as its sole piece of land to go up for sale during the January-March quarter.

The government’s site in Tung Chung measures 10,648 square metres and can yield a gross floor area of 37,200 square metres (400,417 square feet) and 745 homes. The project will sit on reclaimed waterfront land and be served by the future Tung Chung East MTR station, scheduled to open in 2029.

The previous tender for the site, known as Tung Chung Town Lot 55 in Area 106B, was withdrawn in November 2023 due to lower-than-expected bids, said Hannah Jeong, executive director and head of valuation and advisory services at CBRE Hong Kong.

“Given the current residential land market, the bidding price is unlikely to be significantly higher than in 2023,” Jeong said. “Therefore, it will be up to the government to decide whether to dispose of the site this time.”

Eye Towards Supply

The timetable for the Town Lot 55 tender will be announced later. The site is not on the Land Sale Programme list for this financial year, which runs to the end of March, but the government considers this quarter an appropriate time to make the site available after taking into account the recent environment and views from stakeholders, according to a Tuesday announcement.

Other factors in the decision were the December tender awarded to local builder Nan Fung Group — which outbid rivals CK Asset, Sun Hung Kai Properties and a Sino Land-Great Eagle consortium for MTR Corp’s site — and the upcoming completion of public housing in the area.

To sweeten the conditions for Town Lot 55 this go-round, the government is upping the number of homes from 400 in the 2023 tender to 750 with a smaller average size. There is no mandate to build government facilities, and the site’s location on reclaimed land means the developer is not required to conduct any further formation works.

“Despite the low price levels, the Tung Chung Extension Area is expected to develop into a sizeable new town with a scheduled population of 147,200 upon completion, which should attract a good number of bidders this time,” CBRE’s Jeong said.

Also this quarter, the Urban Renewal Authority plans to tender a development project at the junction of Shantung Street and Thistle Street in Kowloon’s Mong Kok area, with the venture expected to provide 340 homes. In terms of private development and redevelopment, two projects are set to complete their lease modifications this quarter, yielding a supply of 13 homes.

“Taking all sources of land supply into account, the total private housing land supply in the fourth quarter of this financial year would support the development of around 1,110 units,” said Development Secretary Bernadette Linn. “Together with the supply from the first three quarters, the total private housing land supply of this financial year is expected to support some 8,340 units, which is around 63 percent of our annual target of private housing supply (13,200 units).”

Financial Balancing Act

The government has awarded two tenders under the Land Sale Programme this financial year, both in the New Territories’ Sha Tin area: a site near City One MTR station scooped up by Sun Hung Kai Properties with a bid of HK$619 million ($79 million) and a plot at the junction of Sha Tin Wai Road and Siu Lek Yuen Road won by Chinachem for HK$1.02 billion.

With only one land parcel going up for tender in the financial year’s final quarter, the government’s financial position will face more challenges, Jeong said. Financial Secretary Paul Chan spotlighted the problem at a Saturday town hall meeting, where he hinted that the financial year’s budget deficit could approach HK$100 billion — up from a previous estimate of HK$48.1 billion.

Chan characterised declining land revenue as “cyclical” and declared that “I absolutely disagree that property prices will definitely fall in the future”, according to an account of the event in the South China Morning Post.

Local newspaper Ming Pao reported last week that MTR Corp would consider property sales to plug budget holes as the transit-oriented developer looks to spend HK$160 billion in the next 10 to 12 years.