Hong Kong’s government may have to step up on land sales as two failed auctions starve the coffers of much-needed revenue
- Two withdrawn tenders in October and May deprived the government of an estimated HK$12 billion in revenue, about 10 per cent of the government’s land-sales receipt from the last fiscal year
- The government still has nine land parcels to sell out of 15 plots earmarked for the fiscal year ending in March 2021
Hong Kong’s government, which depends on land sales for up to a fifth of its annual fiscal revenue, may have to put more plots on the market to fill its coffers amid the city’s worst recession, after two failed auctions in October and May.
A site in Tung Chung near Hong Kong’s airport and Disney’s resort was withdrawn from tender after the biggest commercial plot to go on the market garnered lukewarm response, depriving the government of HK$5.68 billion. In May, the government lost out on HK$7.1 billion after three pieces of land at the former Kai Tak airfield received the market’s collective cold shoulder.
“It was the biggest loss so far we recalled,” said Hannah Jeong, head of valuation and advisory services at Colliers International. “The government has to come up with some kind of ways to stop the bleeding.”
Hong Kong’s economy has contracted for four consecutive quarters, in the city’s worst contraction on record, propelling the unemployment rate to a 16-year high of 6.4 per cent in the fiscal second quarter. Dwindling businesses and loss of corporate as well as personal income are weighing on fiscal reserves, projected to drop to a 17-year low of about HK$800 billion, close to the level last seen during the city’s previous brush with a deadly pandemic in 2003.
Adding pressure on the government’s finances is the coronavirus pandemic, which has closed Hong Kong’s services-dependent economy, forcing Financial Secretary Paul Chan Mo-po to spend more than HK$300 billion from his budget on three rounds of anti-pandemic funds, and a relief package.