Friday, November 27, 2015   

Land prices show no sign of abating

Mary Ma

Monday, November 12, 2012

As development minister, Paul Chan Mo-po can't possibly escape public attention in a society so obsessed with the property market.

Therefore, his mind-boggling, double-negative comment at Friday's Legislative Council meeting - saying it is not an absolute rule that sites on the application list cannot be used for public housing - immediately sparked concerns that private supply may fall short if land intended for the latter is also made available for the former.

Chan sought to play down the remarks yesterday, blaming questions by lawmakers. But will his clarification clear the air entirely about the government's intentions?


Following government crackdowns on property, the market has become unusually sensitive to all kinds of rumors and innuendos. A recent example was the rumor that two sizeable lots in Tseung Kwan O and Ma On Shan were withdrawn by the government after the tenders failed to draw adequate bids.

The speculation was that developers must be scaling down the valuations substantially, while the authorities were unwilling to let the sites go cheaply.

But the outcome was just the opposite - with the two lots fetching a total of more than HK$5.4 billion - surpassing even the most bullish expectations.

The sites aren't huge, but large enough to serve as a reference. Could the deals signify an optimism among developers despite the reinforced special stamp duty and the new levy on non-resident and corporate buyers?

Then there are the conspiracy theorists suspecting the successful bidders deliberately elevated the prices to exclude the small players.

Liberal Party lawmaker James Tien Pei-chun once called the property sector an oligarchy market. All conspiracy theories attract attention. However, it's difficult to justify the huge HK$5.4 billion commitment by the two bidders.

Both winners have a long history of property development in Tseung Kwan O and Ma On Shan. It's likely they were willing to pay a premium for the synergy with existing projects nearby. The sites are also ready for construction and, when the new projects are completed, the low interest environment may still exist.

If the latest crackdown is going to affect land sales, it would be the most undesirable effect. While it will have a psychological impact and help suppress home prices in the short term, housing production will be affected in the long run, pushing prices higher. Under this scenario, home buyers can't benefit.

Most developers have maintained land banks, including farmland, in the New Territories. It requires a long lead time to build homes on the sites, involving lengthy negotiations with the government on land premiums. Lots on the application list can be used immediately, and are therefore coveted by developers.

If the latest land sale signifies anything, it would be developers' optimism. Meanwhile, more potential home buyers reportedly made bookings to view flats on the weekend.

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