With only $71.7 billion ($219 million), the government fell short of its revenue goal for the 2021–2022 land sale programme, which was $420 billion ($54 billion). According to Colliers analyst Hannah Jeong, this failure was mostly caused by poor appraisal.
Jeong encouraged the government to consider market conditions in its assessments given that developers, investors, and market actors are under financial strain as a result of interest rate hikes in order to ensure the success of Hong Kong land sales for 2023–2024.
According to Jeong of Real Estate Asia, "getting a new land with a significant billion dollar amount was not really an easy decision for many developers." "I recommend that they speak with various market participants, such as surveyors, developers, and investors, so that they can comprehend (the sentiment)."
Jeong used the unsuccessful sale of the residential land on Cape Road as an illustration of how government appraisals did not reflect the mood of the market.
"Although the site is in a posh location, there are still geographic difficulties. Additionally, the luxury market was under a lot of strain from the interest rate increase, which not everyone could withstand. To enable the sale of the land when bidders arrive, the government should take into account these elements and lower the reserve price, she said.
"The government always maintains a reserve price, but the market is unaware of it. It is their own knowledge. The reserve price, or valuation, must be reasonable, the speaker emphasised.
The government should "review standard land price and bidding price to ensure they are on par with market situation," stated KK Chiu, international director and chief executive for Greater China at Cushman & Wakefield.
The land sale programme for 2023–2024 includes 18 plots, 12 of which are for homes. According to Jeong, half of these residential parcels are "rolling over from last year."
The government's KPI [key performance indicators] was actually just 50%, thus this means. They failed to meet their sales goals, she claimed.
According to Jeong, another explanation for why the government didn't reach its revenue goal last year is that the actual price at which the lots were sold was less than the government's initial estimate.
Jeong stated that in order for the government to sell its plots, it must "dispose of a site in a consistent manner based on their KPIs."
Best plots
Three of the plots included in the land sale programme for 2023–2024 are most likely to garner interest, according to Jeong.
One of these is a residential site with more than a million square feet of space on Castle Peak Road, So Kwun Wat, Area 48, Tuen Mun, New Territories.
The other two locations that developers might be interested in are Kai Tak Area 4B Site 5 in Kowloon and Yau Kom Tau, Tsuen Wan, in the New Territories.
"The Tuen Mun and Tsuen Wan region has a long history of having a large population and is popular in the local market. Two successful land sales [in these locations] occurred last year, one of which was purchased by CK Asset Holdings in Tuen Mun. Kerry Properties purchased the Tsuen Wan property. Jeong said.
She used the following statement to make her position clear: "These two sites [Yau Kom Tau and Kai Tak Area] are very close to last year's land sales so they will receive a good response from the market."
Jeong emphasised that despite the massive 1.13 million square feet offered by the Kai Tak location, the site is situated next to a runway.
"The infrastructure for the runway is still missing. Residents frequently lament the lack of a monorail in the area. There isn't enough public transport, and the runway is too far away from the outside', she said.
Given this, Jeong believes the site won't be well welcomed in the market or that interested parties will offer a lower bid price.
Market impact
20,000 units are anticipated to be added to the supply pipeline for 2023–2024, demonstrating the government's "eagerness to make the supply and demand balanced" and make housing "more affordable," according to Jeong.
However, she stressed, how many plots the government sells will still determine whether or not this 20,000 forecast is actually realised.
Since developers don't have to sell everything right away after finishing [a project], the actual delivery from them can fall short of that estimate. 20,000 units or more, in my opinion, remain up for debate, Jeong added.
According to Jeong, there should be actual mechanisms in place for the market to adjust, but the government did not include them in its most recent budget.
"The government barely mentioned the stamp duty... We must keep in mind that the extra stamp taxes held the market artificially quite firmly. The administration set the December tariff cut at $9 million (US$1.16 million) or less. That amounts to less than 1% of the cost of the home. It won't do much to boost the market, she said.
Given the current political climate, which includes the geopolitical tensions between China and the US, Hong Kong's economy's slow recovery, and the high interest rate, she added, "We [are] still looking at the market downtime, at the approximately -3% adjustment for 2023."
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