Small developers are flocking back to government land sales after being edged out by property heavyweights over the past decade, with an increase in land supply giving them a fighting chance to elbow their way into the world's most expensive property market. In a significant change from the previous government's housing policy, the administration of Chief Executive Leung Chun-ying decided to boost the amount of land, with more lots available in small sizes, to ensure there will be an annual supply of 20,000 private flats. Chris Hoong, the managing director of Far East Consortium International, said small and medium-sized developers struggled to compete in government land sales or auctions dominated by big conglomerates. "Previously, every lot had been sold for outrageous amounts of several billion dollars. It was a game that we can ill-afford to join," Hoong said, adding that his company resorted to buying land overseas. Far East Consortium extended its reach to properties in Melbourne, Kuala Lumpur, Singapore and even pricey London, where land is less expensive. Small and medium-sized developers could hardly compete with their bigger rivals because most government land sales or auctions featured large chunks of property, Hoong said. "Today, the land market in Hong Kong is different. With more land supply, it gives us more chances to build up our land bank again," he said. Through government tenders, Far East Consortium was able to buy two small development sites, in Sha Tau Kok and Tai Wai, Sha Tin, in six months. In October last year, the company won a plot in a closed area in Sha Tau Kok for HK$143 million, or HK$1,195 per square foot. The site, near the border, could be developed into a residential project with a maximum gross floor area of 129,577 sq ft, or at least 240 flats. Six months later, Far East Consortium won another residential site, in Tai Wai, for HK$148 million or HK$3,336 per square foot. Other small developers, such as the Wang On Group, are also taking part in the government's land sales. Last Thursday, a joint venture between Wang On and Kam Wah Holdings won the bidding for a site in Ma On Shan for HK$703.8 million. The site, close to the Ma On Shan Line, could yield a gross floor area of 200,210 sq ft, with a price of HK$3,315 per square foot. "It is our first time securing a development site in a government land sale," said Gary Wong, a sales and development director at Wang On. Wong said the joint venture planned to invest HK$1.6 billion to develop the site, which would include the land cost and the building of about 380 units on the property. "We have nearly exhausted our land bank as most flats in existing projects had already been sold," he said. Far East Consortium has a market capitalisation of HK$5.2 billion, while Wang On has HK$1.5 billion. Two years since taking over as chief executive, Leung and his government are still wrestling with difficulties in increasing land supply, having already considered the controversial proposal to build a new town in northeast New Territories. Wong said the previous land sale system had effectively priced out small developers, so the firm turned to acquiring old buildings and redeveloping them into upmarket residential projects. However, the double stamp duty introduced last year raised the acquisition cost for properties and increased risk in the business, he said. "With the decline in land values, we grabbed this opportunity to acquire government land," he said. Falling land prices also lured mid-tier commercial developer Great Eagle Holdings last month as it bought a waterfront site in Pak Shek Kok, near the Science Park, for HK$2.41 billion, the first time it had done so in 25 years. The record-low winning bid was equivalent to HK$3,300 per square foot. Thomas Lam, the head of valuation and consultancy at property agency Knight Frank, said the land market was undergoing significant change. "It is a scene that we've never seen before. We have new entrants like small developers as well as big mainland players," Lam said. The secretary for development, Paul Chan Mo-po, said in his blog on June 29: "We have seen many participants in government land sales in the past two years. [The] market share is also quite fragmented." To address public concern that the city's private residential market is being monopolised by a few big developers and there is a lack of strong competition, Chan stressed that half of the 59 residential sites were 5,000 square metres or less. Nine sites went to three major developers and those areas could provide in excess of 3,800 units. More than 30 developers, including those bidding in joint ventures, won 44 sites that could be developed into 12,000 units or more. For small developers such as Far East Consortium, the price of land in the city is still too high. "Land is a rare product in Hong Kong and we don't see home prices falling significantly. In our view, Hong Kong is still attractive as it provides a stable investment return for us," Hoong said.