The difference on land premium assessments between the government and developers is caused by insufficient information flow and the complex pricing arrangement for new project sales, according to market players. They said the suspension of land sales had also increased the difficulty in comparing values because of an absence of new transaction data. A government official said the Lands Department was adopting a residual valuation method to assess the land value after the suspension of land sales. 'It means to use the selling price of property to minus the interest and construction costs to estimate the land value. Sometimes previously fetched prices on comparable land auctions will be counted,' the official said. He said the selling price of property was based on transaction records in the Land Registry but secondary market transactions from estate agents would also be used as a reference. The official admitted the government might not be able to achieve the most updated references since transaction records were usually obtained one month after deals were sealed. Gold Rich Consultants director Francis Lau Tak said the complex pricing structure had complicated the premium assessment. Developers are using a variety of incentives to lure buyers, such as cash rebates, free stamp duty and legal fees, discounted interior decoration and furniture and subsidies for interest and mortgage instalment repayments. Mr Lau said these terms could end up as a discount for more than 10 per cent of the book flat value, but the discrepancy could not be shown in the Land Registry. 'The developers' estimation on land premium could be much lower [than the Government] as their assessment for net price will deduct the value of all preferential packages given to buyers, which is served as part of their sale cost,' Mr Lau said. The government official said the price discount could only be taken into consideration if it had been clearly listed in the price list.
