Hong Kong Suspends Government Land Sales in Q1 as Developer Demand Dries Up

Hong Kong has paused government sales of commercial and residential land for the first quarter of this year because of weak demand from developers after a string of lacklustre tenders.

In the January-to-March period, which corresponds to the fourth quarter of Hong Kong’s 2023/24 financial year, the government will put no private residential sites up for sale for the “first time in recent years” as “the market is not too keen in tendering” for such properties, Development Secretary Bernadette Linn told reporters Thursday.

Property consultancy Savills, citing local media, said the halt in residential land sales would be the first in 14 years. The decision comes after land sale revenue in the first three fiscal quarters totalled HK$12.3 billion ($1.6 billion), or less than 15 percent of the government’s full-year estimate of HK$85 billion.

“If we can make ends meet largely, for this current financial year, I think it is prudent for us to also take into account the prevailing market sentiments by not putting up further sites for sale in this quarter,” Linn said, vowing to announce the next quarter’s land sales plan “very soon”.

Shrinking Piece of the Pie

Hong Kong’s 2023/24 budget envisioned land sales making up 13.2 percent of government revenue, but the current pace suggests a figure well short of the mark after an economic rebound failed to emerge last year in the Asian financial hub.

In the previous five years, the share of the budget generated by land sales averaged 18.2 percent, hitting a high of 24 percent in 2019/20. The proportion saw its biggest drop during the period in 2022/23, falling to 11.2 percent from 20.6 percent in the prior financial year.

Hong Kong’s policy contrasts with that of chief regional rival Singapore, where the law forbids the use of land sale revenue for budget spending. Instead, proceeds from land sales are added to a subset of the city-state’s national reserves known as past reserves, which among other things are used to fund land reclamation.

The Singapore government’s view is that reliance on land sales subjects the budget to the booms and busts of the property market and creates an incentive to plan land sales based on fiscal instead of developmental needs, favouring higher land bids that ultimately lead to more expensive housing for citizens.

Industrial Site Tender

Hong Kong last year saw six land tenders withdrawn after receiving no bids or insufficient bids. Only one tender was awarded during the fourth quarter of 2023, for a far-flung Lantau Island residential site won by Sino Land.

With no new sales of commercial or residential land, the government announced Thursday that a single industrial site in the New Territories’ Yuen Long area would go up for tender this quarter.

The site at Fuk Wang and Wang Lee streets near Yuen Long InnoPark measures 3.2 hectares (7.9 acres) and can yield 160,000 square metres (1.7 million square feet) of floor space. The winning bidder must set aside and transfer at least 30 percent of the floor space to the government for leasing to brownfield operators affected by the government’s development projects.