The government has finally thrown in the towel with the application list system and will rely on regular land sales from now on as it grapples with tight land supply and stubbornly high property prices.
The unexpected move came as Secretary for Development Paul Chan Mo-po announced details of the new land sale programme for the coming financial year.
“For 2013-14, we have abolished the application list system in order to make everyone clearly understand that the government has taken complete initiative for sales of government land,” Chan said.
He said there were continuing misconceptions from legislators, the public and academics regarding the effectiveness of the application list system.
The main complaint was collusion by developers in refraining from going to the application list to buy land in order to maintain high property prices.
As such “in order to thoroughly do away with these misconceptions” the government decided to scrap the application list.
In the application list, if developers want to buy land, it would choose a site on the application list, submit a price and if the price was at least 80 percent of Lands Department’s own internal estimate of open market value, the site would be triggered for auction.
The application list has been in used since 1999 in parallel with regular land sale programme.
From 2004 onwards the government relied solely on the application list order to boost the sagging property market at that time.
While some developers were able to trigger a site for auction and go on to successfully win it, others watched the sites that they triggered for auction go to another developer.
Other developers spent ages repeatedly trying and failing to trigger a site for auction.
The application list system existed in name only from 2010 onwards when the government announced it would resume regular land sales on a limited basis initially.
Chan said during the 2011-12 financial year, 27 residential sites were sold of which only one was triggered for auction.
In the 2012-13 financial year, 24 residential sites were sold of which only two were sold through the application list.
“We can say thus, since 2010 when the land sales programme was introduced, the government has already in fact taken the initiative in land supply,” Chan said.
A total of 56 sites are in the land sales programme for 2013-14 of which 22 were rolled over from 2012-13.
Of the 34 new sites, 28 of them are residential use with the remaining six being commercial or business use.
For the rolled over sites, 18 sites are residential use, three sites are commercial or business use and one site is for hotel use.
For the coming financial year, the government set a target of providing land to allow 25,800 units to be built.
About 13,600 units would come through the land sales programme while another 2,600 would come from land on the West Rail which is still controlled by the government.
The MTRC (0066), 77 percent owned by the government, would provide land for 3,100 units while the Urban Renewal Authority will provide 1,800 units.
Developers will still be expected to cough up from their own land banks.
Based on records for the past ten years, about 3,500 units would come from land that has undergone lease modification or land exchange while another 1,200 units are expected to come from land that does not require lease modification or land exchange.
The government said earlier that it was looking to provide at least 20,000 new residential units a year from the private sector.
Asked by Construction Post whether the government would continue to sell land regularly if the property market was down, Chan said the Financial Secretary John Tsang Chun-wah pointed out in his budget speech that Hong Kong was facing a period of slow growth.
“We will continue to sell land. Even in the coming year if there is [pause for five seconds] an adjustment, the land will still be sold,” Chan said.
Apart from the new land sales programme, Chan also announced the sites scheduled for sale in the first quarter for 2013-14.
A total of nine sites are set for sale of which seven sites are residential use while one site is commercial use and the last site being hotel use.
Three of the residential sites would have flat size restrictions, Chan said.
Midland Surveyors director Alvin Lam Tsz-pun said adoption of regular land sales would give the government a better chance of meeting its annual housing production target.
“Apart from prompting developers to put their units on the market sooner, buyers in the market will clearly see there will be enough supply,” Lam said.
Stewart Leung Chi-kin, chairman of the executive committee of The Real Estate Developers Association of Hong Kong said since the application list only accounted for one or two sites a year, it was better off dumping it.