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Concrete Analysis | Hong Kong government’s move to standardise land premium rates has potential to boost much-needed housing supply
- The new formula to calculate land premiums can speed up the land-conversion use process, which can go a long way in boosting housing supply
- It took an average of seven months previously to reach a final agreement using conventionally calculated land premiums
Hong Kong’s land supply shortage and housing crisis has been the bane of the city’s prosperity for decades. Its residents cry for affordable homes whilst many restlessly wait in line for an average of six years to be granted public housing. The city has been battling this crisis since the handover in 1997.
And while private land owners are faced with the duty to fulfil the city’s demands to provide homes in quantity and quality, the conventionally calculated land premiums would often take an average of seven months to reach a final agreement.
Thus, to alleviate this burden, in 2020, the Hong Kong Institute of Surveyors proposed that the government apply standard rates to assess land premium for lease modification and land exchange. The approach aims to enhance the efficiency in processing land-development applications and to encourage better use of idle land, thus increasing the potential of land and housing supply.
The two-year pilot scheme of charging land premiums at standard rates has proved successful in the redevelopment of industrial buildings.
At the same time, the addition of the new development areas (NDAs) in the New Territories has seen developers increase their land holdings and convert agricultural land to residential use.
