Bid to win?

Recently, a joint venture of two mainland Chinese companies won the bid for a site by the sea on Ap Lei Chau at a record-breaking price. It is one of many similar deals.

The market has been talking about this deal, and even the new financial secretary has openly expressed that land prices have reached an alarming level. Meanwhile, some critics blame that mainland Chinese developers are too aggressive and, as a result, property prices go up sharply.

In fact, to suppress home prices in the past few years, the government has launched a series of measures to manage the demand, which has effectively and temporarily slowed down the growth in residential property prices.

However, stimulated by the latest land sale and record high prices, and although the government has tried to increase the stamp duty to 15%, which is more favourable to first-time buyers, it hasn’t stopped the momentum of growth in price.

For the past few years, the SAR government’s land sale system has adopted the tendering format to avoid prices being pushed up in the frenzied atmosphere of a land auction.

All developers who are interested in a plot of land would offer a price based on their own assessment. Both Hong Kong and mainland Chinese developers tend to be very aggressive based on their judgments.

However, since they are merchants, they are looking for profit. As a matter of fact, the second and third highest offers are from local developers. There is no point highlighting that only the mainland Chinese developers are aggressive.

In my view, at the time when no mainland Chinese developers were participating in land auctions, the prices still rocketed due to economic growth.

In such cases, though it could have been a Hong Kong developer who won the bid, the price of the second-hand market was still going up significantly.

Besides, land prices would have been easily manipulated if there were only a few developers joining the bid. It is not good news for Hong Kong home buyers.

To look at it positively, having more developers in the market means there is a good variety of choices regarding design, affordability and market needs. Developers will try to make their flats as excellent as possible and reduce their profit margins to attract buyers.

Of course, land prices have exceeded what the government expected, and have brought significant revenue to the treasury.

If the SAR government uses the income on building infrastructure to benefit Hong Kong residents and to strengthen the support of education, health and the ageing population, and more importantly, to spend more on the public housing system that will benefit the grass roots section, then there is no harm in high land prices.