Hong Kong will scrap an almost decade-old system of selling government-owned land only after receiving guarantees of minimum bids from developers, as it seeks to increase the supply of homes to curb price gains.
“We won’t have to wait for any developer to trigger a land sale,” Secretary for Development Paul Chan told reporters yesterday. “They will be determined by the government based on the needs of the market, to ensure land supply can be increased to the fullest extent.” The system will end in April, he said.
Hong Kong home prices have doubled since early 2009 amid near-record low mortgage rates and a lack of new supply, benefiting developers including Sun Hung Kai Properties Ltd. and Cheung Kong Holdings Ltd. Hong Kong Chief Executive Leung Chun-ying has imposed property taxes on foreigners to curb demand and has pledged to bolster land supply as discontent soared with the declining affordability of homes.
“In theory, this’ll make things more agile for the government,” said Edward Farrelly, Hong Kong-based head of research at CBRE Group Inc. “But in practice, it all comes down to how fast they can step up the pace to increase land supply.”
The government will step up efforts to increase the quantity and pace of short-term land supply, accelerating requests from developers and putting any additional available land on sale as soon as possible, Leung said in an e-mailed statement yesterday. His administration is “determined” to tackle the city’s housing problem, he said.
The Hong Kong government introduced the so-called application list system in 2004 after real estate prices plunged following the Asian financial crisis and the severe acute respiratory syndrome, or SARS, health crisis. Under the system, land auctions are triggered only when developers promise to pay minimum amounts for sites on a list.
Hong Kong halted regular land sales in 2002 and partially resumed them in 2010.
In the past two fiscal years, developers only triggered three land sales, Chan said. The government plans to put 46 residential sites on sale during the fiscal year starting in April, he said.
Since 2010, the government has introduced at least six rounds of property-price curbing measures, including raising transaction taxes and raising mortgage down-payment requirements.
The government on Feb. 22 doubled the stamp duty on all properties above HK$2 million ($258,000) as it widened its property curbs to cover commercial transactions, including parking spaces, shops and hotels. The same day, the Hong Kong Monetary Authority said it will tighten mortgage terms for commercial properties and parking spaces.
Four out of the five richest people in Asia, including Cheung Kong Chairman Li Ka-shing and Henderson Land Development Co. founder Lee Shau-kee, control a Hong Kong developer, according to the Bloomberg Billionaires Index.