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year, the government can ill afford to allow any railway project tender to develop land offered by the MTR Corp to be withdrawn again if the chief executive is keen to achieve the annual housing target."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.