The unusual absence of a specific land premium payable in the latest tender document for a large residential site owned by MTR Corp in Tin Shui Wai signals the government’s desperation to achieve its housing target for this fiscal year.
In a departure from past practice, developers taking part in the retendering for the site, which will provide 1,500 flats near the Tin Wing Light Rail stop, will name the land premium they are prepared to pay.
The move reflects the apparent willingness of Chief Executive Leung Chun-ying’s administration to sacrifice some land revenue to boost developers’ interest, market observers said.
“The government is now running out of time,” said one of the 19 developers that submitted expressions of interest in the Tin Shui Wai site last week.
“With just three months left in this fiscal year, it can ill afford to allow any railway project tender to be withdrawn again if the chief executive is keen to achieve the annual housing target.”
Whether it was the first in a series of sweet deals from the government to entice bidding interest in railway projects still remained to be seen, he said.
In February last year, MTR Corp, in which the government is the controlling shareholder, was forced to terminate the initial auction for the site after failing to receive any bids.
The fiasco was widely blamed on the HK$2.69 billion land premium the Lands Department wanted to collect in the transaction.
“The absence of a specific amount of land premium in the latest MTR tendering indicates a change in the government’s stance and flexibility in its land premium fixing practice,” said Charles Chan Chiu-kwok, managing director at Savills Valuation and Professional Services.
Leung has pledged to supply 20,000 new flats a year, of which 6,000 are to be built on land from railway-linked projects being offered by MTR, including on its West Rail line.
The land released by the government so far in the financial year ending in March would be sufficient to build just 13,700 flats.
“The railway development projects are a very important source of private land supply,” said Chan.
Vincent Cheung Kiu-cho, national director for greater China at property consultancy Cushman & Wakefield, expects the Tin Shui Wai site to achieve a price tag of HK$2 billion, or about HK$2,000 per square foot, or even lower given the location.
If the site sold for HK$2 billion, the government would receive about HK$700 million less than the land premium it originally sought.
The site near the Tin Wing Light Rail stop is one of four major residential sites along MTR and West Rail lines originally scheduled for tendering for the fiscal year ending in March.
So far, only the site at Long Ping (South) Station, which will provide 720 flats, has been sold, in June last year.
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 all the remaining three railway projects are sold before the end of March.
MTR has also scrapped the requirement in the original tender that the winning bidder pay HK$400 million for site formation works.
An MTR spokesman said: “The tender arrangement has taken into account the unique situation of this case, including market response to the first tender exercise in February; the special requirement for the light rail station platform migration and the reinstation work and the prevailing property market condition.”
Tendering closes on January 21.
“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,” Chan said.