The right decision was made on Peak site
The decision to withdraw from the market a prime site that was tipped to reach a record price was attacked by some critics as an example of the government’s unofficial “high land price” policy. That’s a bit of a stretch
The erratic land sales of the post-handover government have been a disaster for Hong Kong. Undeniably, it has helped to boost high land prices, consolidate the property market for a few dominant developers and create high market barriers to entry by would-be builders.
But it’s a bit silly for some critics to cite those as reasons for the government to withdraw a prime site at The Peak from the market this week after bidders failed to meet its minimum price.
They claim the withdrawal means the government is following the unofficial “high land price” policy. That’s a bit of stretch.
The widespread criticism even prompted a statement from Chief Executive Carrie Lam Cheng Yuet-ngor. “We do not have a high price policy,” she said. “But we will not sell our land cheaply either.”
The Mansfield Road property with a gross floor area of 404,300 square feet, was expected to fetch a record HK$48.5 billion (US$6.2 billion), or HK$120,000 per square foot. It could accommodate up to dozens of three-storey houses of about 5,000 sq ft each and a couple of 12-storey apartment buildings with 3,300 sq ft on each floor.
The failed bidders were the usual suspects: Sun Hung Kai Properties, Henderson Land Development, CK Asset Holdings and K Wah International, and a consortium consisting of New World Development, Nan Fung Development, Chinachem Group, China Overseas Land & Investment, Wharf and Sino Land.
None of them are in the good graces of the public, which views them, understandably, with suspicion. Suppose the government went ahead and sold the site anyway even if no bidder met its reserve price. Surely, it would be accused of collusion and corruption – and rightly so. The only winner would be the developer.
Given the location of the site, its price tag is at the extreme luxury end of the market. It is therefore divorced from much lower valuations in the mass market.
The problem with the failed sale is not that the reserve price was too high. Rather, long-time bullish market sentiments have turned recently and the bidders got cold feet.
The government doesn’t need the money. It is already sitting pretty on HK$164 billion from land sales from the last financial year, accounting for 27 per cent of its total revenue. That is also the largest chunk of its revenue.
The site can always be re-tendered. Meanwhile, all sides will have more time to gauge market directions.