New | Hong Kong government urged to review land premium assessment system to raise home supply
Developers say sharp increase in marketing cost has not been reflected in assessment process
The Hong Kong government has been urged to review marketing cost for residential projects, one of the parameters used in assessing the amount of land premium to charge when developers apply for land to be rezoned as residential, a move that will overall improve land supply.
Property consultants said the current assessment by the government on marketing costs for residential projects did not reflect the actual spending by developers. It adversely affected the ability of the government and developers to reach an agreement on the amount of land premium to convert their non-residential sites into residential use.
"Consequently, this will affect the new housing supply," said Lau Chun-kong, head of Asia valuation advisory services at property consultant JLL.
Under the current land administration policy, where a lease modification or change of land use results in an increase in land value, the developer is liable to pay the premium, The Lands Department will then deduct the projected development costs and the developer's profit from the enhancement in land value.
According to the government's calculation, marketing cost accounts for 1 per cent or less of the sales proceeds, said Lau. But now developers say that cost has risen to more than 6 per cent.
"It depends on the size of the development. In our experience, marketing cost for a single-block building is between 6 to 8 per cent of the selling price," said Phileas Kwan Po-lam, an executive director of Asia Standard International Group.
"Agents' commission is on the rise, from originally 2 per cent to an average of 3 to 5 per cent," said Kwan.
