Land sale squeeze

Hong Kong will auction just one plot of land this quarter under its land sales program which will yield a mere 110 private homes, the lowest quarterly number ever.

A small site in Cheung Sha on Lantau Island will be the sole residential plot put up for sale this quarter, Secretary for Development Bernadette Linn Hon-ho said yesterday.

The cutback is seen as a way to support the city's depressed property market and developers but analysts warned it will further weigh on the government's fiscal deficit, at least in the short term.

The site on Tung Chung Road with an area of 19,000 square meters is valued from HK$409 million to HK$730 million, or from HK$5,000 to HK$9,000 per square foot. Such a small price tag will not help much in reaching the annual land sale revenue target of HK$85 billion, surveyors believe.

Still, reducing the supply for a short period may offer some help to developers who are already struggling to reduce their inventory, said Alvin Lam Tsz-pun, director at Midland Surveyors.

Together with other sources of supply, the total private housing land supply is projected to reach 3,200 units in the three months through December, Linn said.

Along with the supply in the previous quarter, the total home supply in the first three quarters of the fiscal year that started April will be 10,150 units or about 80 percent of the annual target, Linn noted.

She said the government is optimistic about reaching the goal and will adjust the quarterly land sale plan based on the market condition without compromising the policy objective of ensuring a stable housing supply.

The program is to meet the economic and housing needs in society so authorities would never hold on to land until the sentiment improves, Linn said. When the market remains weak, the government will arrange for the sale of sites in a prudent and step-by-step manner and in accordance with the market's affordability, she added.

Given the high vacancy rate in the commercial market, Linn said it made sense to "hold off" for a while and thus there will be no commercial site up for tender in the quarter.

Even though the annual supply figure is on track to hit the target, Midland Realty believes it would be "extremely difficult" to complete the land sale revenue target of HK$85 billion. The city only has gained HK$15.6 billion from selling land so far, the agency said.

If the high-interest rate environment continues next year, the government may have to cut the revenue target again in the coming budget, said Lam, though he believes the government will probably maintain the supply target at around 12,000 units.

Other projects to be tendered this quarter include the MTR Corp's Tung Chung East station project, which is inviting developers to submit expressions of interest. It is estimated to provide 1,200 homes. The Urban Renewal Authority's Kai Tak Road/Sa Po Road Development and Shing Tak Street/Ma Tau Chung Road Development will be good for 1,450 flats, Linn said, adding that seven private developments to complete lease modification will offer a supply of 440 homes.

This came as former Secretary for Commerce and Economic Development Frederick Ma Si-hang said Hong Kong may face mounting pressure on public finance next year and should carry out sweeping reforms to boost the economy.

aiden.he@singtaonewscorp.com