Urgent need to restart Hong Kong land auctions
The government has to break the stranglehold a few developers have on the residential market
The one glaring omission from the policy address with regard to an increase in land supply and subsequent increase in flat supply was an unequivocal statement to immediately restart government land auctions.
It is well understood by all in the industry and also the public that there is no quick fix to the problem of increasing flat production in the short term as the new administration has, to a large degree, inherited the problem.
The policy address by Chief Executive Leung Chun-ying outlined initiatives to get more sites available for sale, but the government still seems to prefer the Sale by Application system and its rather tepid Sale by Tender List method, which continues to play into the hands of those developers with large land holdings who may still choose not to apply for sites, preferring to develop their existing land banks when they perceive the market to be right for them to maximise their profits.
There is nothing intrinsically wrong with that because that is what developers are there to do.
What is wrong is the government's inability to break this cycle by making as much land as possible available for sale in the open market and try to break the stranglehold a few developers now have over the residential market.
The market's reaction to the policy address is telling. Their reading is that there will be a continuation of the existing policies, which have to a large degree got us into the current mess we are in.
If the government were to announce an immediate start of land auctions this would send the strongest possible message that they were on the side of the public, not on the side of the developers.
A quick look at the Lands Department's website shows there are at present 26 residential sites available for sale. So why not announce a programme for the sale of these sites over the coming 24 months, with say an auction held every two months with two or three sites up for sale each time?
Both big and small sites should be included to enable the widest possible participation by different-sized developers to provide a variety of housing for different needs. This would immediately widen the market and start to dilute the position of the current major developers.
As soon as the auction programme and the first auctions have taken place, that would be a very public statement that land is being put up for sale, as soon as possible. There would be a consequential increase in flat supply and public perception may then very well change.
The sale of these 26 sites could then be followed by the sale of some of the other sites that the policy address has identified as future possibilities.
However, a word or two of caution is needed here so that we do not repeat the mistakes that led to the Hung Hom Peninsula fiasco. I believe we are still, essentially, a capitalistic economy and should demand that land is put to its best use. Therefore allocating prime residential sites, such as a public rental housing site, on the waterfront at Tung Chung in front of existing private housing is plain wrong.
This will probably result in a reduction in values for existing owners of the adjacent private property. At a minimum, their rateable values should now be adjusted downwards to reflect this new situation but that will be scant comfort or compensation for poor and misguided governance.
I am a supporter of the adequate provision of public rental housing but firmly believe it should be built in the right place, such as the proposed new development areas in the northwest New Territories. I cannot accept the idea that such heavily subsidised tenants are entitled to the same quality sea view as those owners who have paid hard-earned money for the same view.
Similarly, there may be some developments adjacent to land currently zoned as a "green belt", which purchasers bought in good faith thinking that their views would be guaranteed in the future. Some of these developments may suffer a similar fate if a rezoning exercise goes ahead as planned and some "green belt" land is rezoned and sold for residential development.
The government, in particular its planners, needs to proceed with caution and due regard and respect for existing private property rights.
Roger Nissim is an adjunct professor in the Department of Real Estate and Construction at the University of Hong Kong