LCQ2: Increasing Government revenue from land premium
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Question:
Land premium is one of the major revenue sources of the Government. However, there are views pointing out that the current high inventory of new private residential units has reduced developers' willingness to bid for land, apply for payment of land premium and redevelop old buildings. This has led to significant fluctuations in public finances. In this connection, will the Government inform this Council:
(1) whether it will consider introducing targeted measures to lower the initial investment costs for developers' projects, e.g. enhancing the additional conditions for land sales and splitting up sites for sale, etc, as well as stepping up publicity to attract more local and overseas developers to invest in land, thereby increasing the revenue from land premium; if so, of the details; if not, the reasons for that;
(2) whether it will re-launch the "Application List" system (i.e. the Government puts land up for sale hinges on whether there is any developer triggers a certain piece of land) in order to strike a balance between market demand and the Government's dominant position; if so, of the details; if not, the reasons for that; and
(3) apart from lowering the application threshold for compulsory sale for the redevelopment of old buildings, will the Government consider adjusting the upper limits of plot ratios in various districts to attract developers to participate in the redevelopment of old buildings by raising the plot ratios of sites earmarked for redevelopment; if so, of the details; if not, the reasons for that?
Reply:
President,
The Government land revenue primarily comes from premium generated from land sales, private treaty grants and lease modifications. The market sentiment can be affected by economic and property market conditions, resulting in fluctuations in land revenue. The Government's policy objective is to maintain a sustained and stable land supply to support society and industry development in Hong Kong. The Government will continuously create land and roll out such land to the market in an orderly manner in light of the latest situation.
Regarding various parts of the Hon Chen's question, the Development Bureau (DEVB)'s reply is as follows:
Firstly, regardless of external environment or property market conditions, the Government will strive to enhance the attractiveness of land sale sites. When formulating the annual land sale list and deciding when to dispose of individual sites to the market, the Government has been closely monitoring market conditions and listening to the views of the industry and potential investors. In recent years, the Government has introduced smaller-scale residential sites located in mature neighbourhood with simple tender terms. The market response has been positive, with all four residential sites successfully tendered out in the previous financial year (2024-25).
Apart from individual land sale sites, we are mindful of the need to alleviate the financial pressure on developers participating in projects of larger scale. Last December, the Government conducted an expressions of interest exercise for three pilot areas under large-scale land disposal in the Northern Metropolis (NM). We have invited the market to provide views on, among other things, various financial arrangements including payment of premium by instalment with certain interest rate. We would liaise with the banking sector on any facilitating arrangements for developers to finance the NM projects. To enhance development incentives of the developers, we will consider allowing land owners to voluntarily surrender land planned to be resumed by the Government in the NM to offset the premium payable for in-situ land exchange or large-scale land disposal in new development areas. In addition, we are exploring wider application of the "pay for what you build" approach, which allows developers to pay premium for lease modifications that is determined based on the actual floor area and actual use, thereby reducing their development costs.
On publicity, we held the Enterprise Participation in Northern Metropolis Development Event last November. Over 80 enterprise representatives attended and signed a Memorandum of Understanding about supporting and participating in the NM development. During the ceremony, 35 enterprise representatives also signed agreements among them to collaborate in the NM development, with a total investment of over $100 billion, demonstrating strong confidence and interest in the NM.
We also joined hands with other bureaux, the Office for Attracting Strategic Enterprises (OASES) and Invest Hong Kong (InvestHK) in promoting the NM and facilitating the development of various industries therein. In particular, OASES is tasked with attracting high-potential and representative strategic enterprises from around the globe, and has announced four batches of 84 strategic enterprises that have set up or expanded their businesses in Hong Kong, many of which have also expressed interest in establishing their presence in the NM. InvestHK, on the other hand, is committed to assisting Mainland and overseas enterprises to set up and expand in Hong Kong by providing one-stop support services. Last year, InvestHK assisted over 500 enterprises to set up or expand in Hong Kong, including those which have expressed interest in the land for industries in the NM. OASES, InvestHK and the Northern Metropolis Co-ordination Office under the DEVB will further collaborate to follow up on the needs of those enterprises interested in setting up businesses in the NM.
Secondly, under the prevailing system, the Government will announce the Land Sale List in advance on a yearly basis, and also the land tender programme on a quarterly basis based on considerations such as policy needs, market conditions and other sources of supply. We consider that the current system enables the Government to assume the lead in land disposal, thereby ensuring that it can increase the supply of land in a stable and prudent manner. At present, the Government has no intention to re-launch the "Application List" system, nor does it have any plan to implement a dual-track approach of land sale and adopting the "Application List" system, so as not to cause disruption to the Government's strategy and pace regarding land disposal and send confusing signals to the market. If developers are interested in particular sites, they may express their interest to the DEVB through various channels for its reference.
As one of the Government's measures to encourage the private sector to participate in the redevelopment of old buildings, the Land (Compulsory Sale for Redevelopment) (Amendment) Ordinance 2024 (the Amendment Ordinance) was implemented last December to lower the compulsory sale application thresholds and facilitate multiple adjoining-lot compulsory sale applications. Since the implementation of the Amendment Ordinance, the Lands Tribunal has received four compulsory sale applications.
The Government has also implemented other measures in recent years to incentivise the private sector to participate in the redevelopment of old buildings, so as to expedite the pace of urban renewal. For example, we have been progressively implementing the recommendations proposed in the District Study for Yau Ma Tei and Mong Kok completed in 2021, including piloting the transfer of plot ratio within the same district and permitting interchangeability of domestic and non-domestic plot ratio, with a view to enhancing the financial viability of redevelopment projects. For the ongoing district studies for Sham Shui Po and Tsuen Wan being undertaken by the Urban Renewal Authority (URA), we would explore the feasibility of adjusting the maximum plot ratio of individual district, as well as increasing the maximum plot ratio of individual old building site upon redevelopment. The URA will submit the Master Renewal Plans to the Government in the second half of this year. Moreover, the DEVB is studying the use of newly developed land to drive large-scale urban redevelopment projects, including considering cross-district transfer of unutilised plot ratio be allowed from old districts to new development areas, and reducing the density of old districts. We will complete the relevant study and put forward preliminary recommendations within this year.
Ends/Wednesday, July 23, 2025
Issued at HKT 15:48
Issued at HKT 15:48
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