• Wed
  • Oct 22, 2014
  • Updated: 3:24am
NewsHong Kong
DEVELOPMENT

Leung Chun-ying's housing target at risk, new tack on development shows

Experts say time running out to meet housing goal as pressure grows for development deals

PUBLISHED : Thursday, 02 January, 2014, 2:59am
UPDATED : Thursday, 02 January, 2014, 9:13am
 

An unusual decision by the government suggests it is at risk of missing its homebuilding target for the current financial year, observers say.

It has allowed property firms to dictate how much land tax they are prepared to pay for the rights to develop a major residential site in Tin Shui Wai.

Chief Executive Leung Chun-ying had pledged to supply 20,000 new flats a year as part of a plan to tackle soaring housing inflation that is pushing home ownership ever further out of the reach of ordinary Hongkongers and fuelling social discontent.

But land released by the government so far in the financial year that ends in March can only accommodate 13,700 flats.

"The government is running out of time," one of the 19 developers who submitted expressions of interest in the Tin Shui Wai site last week told the South China Morning Post. "With just three months left in this fiscal year, the government can ill afford to allow any railway project tender to develop land offered by the MTR Corp to be withdrawn again if the chief executive is keen to achieve the annual housing target." The developer declined to be identified.

The government's housing target includes the building of 6,000 flats on land linked to railway projects that is being offered by the MTR Corp, such as that in Tin Shui Wai, which will accommodate 1,500 new homes.

In February last year, the MTR Corp - in which the government is the controlling shareholder - was forced to withdraw from tendering the site after it received no bids.

The fiasco was widely blamed on the HK$2.69 billion land premium that the Lands Department slapped on the transaction.

It was therefore decided that, in an unusual departure from past practice, developers taking part in retendering would state the value of the land premium they were prepared to pay.

Meanwhile the MTR Corp has scrapped the requirement in the original tender that the winning bidder pay HK$400 million for site formation works.

Vincent Cheung Kiu-cho, national director for greater China at property consultancy Cushman & Wakefield, expects the Tin Shui Wai site to sell for a maximum of HK$2 billion, or about HK$2,000 per square foot of permitted gross floor area. At that price, the government would receive about HK$700 million less than it originally wanted.

The site near the Tin Wing Light Rail stop is one of four major residential sites along MTR lines originally scheduled for tendering in the current financial year. Only one has been sold.

The other two sites in the queue are one at Tai Wai Station, which could provide 2,900 flats, and the LOHAS Park Package 4 in Tseung Kwan O, which could supply 1,600 flats.

Leung's housing target will be met if the remaining three railway projects are sold before the end of March.

"The site in Tin Shui Wai might be used to test the market response. If it generates strong sales, the government may apply the change to other upcoming railway projects," said Charles Chan Chiu-kwok, managing director at Savills Valuation and Professional Services.

The pledge to build thousands of new homes is seen by many industry observers as far more likely to solve the city's housing problems than a raft of restrictions passed to raise stamp duties in a bid to restrain demand.

The calming measures are widely considered to have had a negligible impact on homes at the lower end of the market, instead biting more at the luxury sector which were never likely to be acquired by aspiring homeowners in Hong Kong who are simply trying to get on the housing ladder.

 

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13

This article is now closed to comments

Hollander323
CY Leung is fighting the housing battle for us, but it is funny to note that quite some people tend to feel happy when someone says CY Leung is losing the battle. May be these people think that they are one step closer to getting rid of the underground communist who CY is said to be one. Why can't we just support CY in the fighting? Remember that, we are just helping CY to help us. We are the people of HK.
caractacus
Don't worry, Leung will make it up by rigging things so the Heung Yee **** can exceed all housing records by giving them carte blanche to erect thousands of 3 storey houses in the Country Parks through fraudulent house applications by absentee indigenous villagers who have illegally sold their so called Ding "rights" to crooked developers.
sammckhk
Just who are "industry observers" ? The answer is thousands of new homes ? Unless mainlanders are prohibited from buying properties, the HK property market will continue to be swamped by these buyers who pay silly prices and exclude the ordinary HK citizen from the market. If only HK residents with ID cards are able to buy then we have a sensible market.
dascaldasf
It will be another link in the chain in the 3 administrations after 1997 Handover: Tung, Tsang and now Leung. All incapable of keeping their word. The end story would be down to the 'costs' of such development. A victory for the giant property developers and speculators. What's next?
Byebye
Two giants at war? Please do not do it at the expense of the Hong Kong citizens; we are at your mercy.
chuchu59
This is the problem with the CY administration and I dare say this was also prevalent in the previous ie bowtie's administration. Weak-kneed when grappling with the property tycoons but acting tough against others who don't stand a chance. Property supply and prices will be the last saving grace for CY and he must not lose sight of churning out the supply he promised as he has failed miserably in other areas and his decisions are questionable.
Beijing is watching over your shoulder Mr. CE.
Dao-Phooy
The Government must add in a new term requiring developers to build on the land within 3-4 years in order to prevent these developers from simply holding on to their land banks! This latest decision is insane - what responsible Government lets developers dictate how much premium to pay for a piece of land? What stupid official even brought this proposal to the table for discussion - it's beyond belief its been accepted as a policy!
HK-Explorer
The Government has overestimated end user demand for Hong Kong housing. The estimation was based upon past speculative activity. The current measurers have reduced demand and once interest rates rise the appetite for property will further deteriorate.
These latest measure are solely a Xmas gift to developers who will reduce their costs by 700 million per site for which it will take 3-4 years to design, build and sell the apartments.
Within 4 years the market will have dropped 20% due to housing measures and interest rates. A new chief executive will be sworn in. The new Chief will see prices have dropped too much and remove housing measures and reduce the new construction. House prices will have a 20% rebound.
Now property developers will sell the houses at the same price as today and gained an extra 700 million profit.
If the government was not so concerned about playing to the ever changing whim of the protesters of the week and put in a long term plan like other countries we would have a less speculative market.
They should choose a reasonable 15,000 houses per year and keep stamp duties as they are now. This will create a stable long term vision. Yo Yo planning / policies will always fail and in the end as Leung has seen make you very unpopular.
johnyuan
‘It has allowed property firms to dictate how much land tax they are prepared to pay for the rights to develop a major residential site in Tin Shui Wai.’
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It is utterly a fundamental change for developers and cost of housing consequently.
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It is a more honest way for housing development to reflect market needs alone unaffected by the old model whereby cost on housing must also include the rail construction. For years, such old practice had set the cost benchmark for our flats throughout Hong Kong even for locations where there were no rails and stations to be constructed setting colossal profits for property developers.
.
We certainly hope this new model will stay for good. Any guessing that it is just to meet a housing quantity target for the fiscal year is viewing housing supply too lightly a challenge as if it is serving for political end only.
.
Let us hope housing cost can become affordable with real competition in the market.
.
I must congradulate CY Leung for taking the bold step.
johnyuan
Flats at Cheung Kong's Diva priced 20 per cent below project next door
PUBLISHED : Thursday, 02 January, 2014, 3:26pm
UPDATED : Thursday, 02 January, 2014, 3:26pm
johnyuan
Kerry Properties offering discounts of up to 15.8 per cent on new project
PUBLISHED : Friday, 03 January, 2014, 3:18pm
UPDATED : Friday, 03 January, 2014, 3:18pm
johnyuan
Letting the bidder names their premium in a free market will be a game changer in the collusion infested culture between government and property developer. At least too how MTR should be financed must ask for a rethink. There is more too for long turn consideration, new means of revenue generating for government must be devised. CY Leung and his administration shall get all their hands full.
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The naysayers against the think outside the box move by the government will have no option but find the game changer is of anything but a New Year gift to our greedy developers. Strange.
MingBaakMei
Nonsense. This is the large property companies flexing their muscles and telling CY you play on our terms or we do not play at all.
All that will now happen is the developers will buy more cheaply in order to sell more expensively three years down the road.
The only way CY can help the lower incomes groups is for Govt. to build low-cost housing and sell to those in need - first time buyers and the elderly - arranging financing where necessary.
Thereby Govt. becomes the competitor.
If CY wants to be seen as 'radical' then he has to be bold - for which all indicators are, he is not!
 
 
 
 
 

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