Slow sales in new homes dent demand for land, says academic

A slowdown in sales of new homes since a land auction in September has dampened developers' appetite for land, an academic said after another month in which no bid was received to trigger a government auction of sites for development.

The new-homes market had been relatively quiet over the past six months and this was having a major impact on market sentiment and the confidence of developers, said Eddie Hui Chi-man, a professor in Hong Kong Polytechnic University's department of building and real estate. He pointed to rising interest rates and the relatively high price of new homes as reasons for the recent lull.

'[Homebuyers'] confidence is not yet back,' Mr Hui said. 'They are a bit wary, as the prices achieved at auction will affect housing prices.'

A Housing, Planning and Lands Bureau spokesman said no bids sufficient to trigger an auction for sites on the government's application list had been received since September. Under the application-list system, developers can trigger an auction for a site by making a bid equal to at least 80 per cent of the government's reserve price, which it does not disclose.

Last month, the government unveiled a list of 45 sites for sale in the financial year which began on April 1, and it could take developers another two to three months to assess the suitability of the sites, Professor Hui said. He did not believe the failure to trigger an auction signalled a fundamental flaw in the application-list system, or that developers were trying to sabotage the system.

'Developers need to look for opportunities and evaluate market conditions,' Professor Hui said.