What’s new: Hong Kong completed its last government land auction this week at a lower-than-expected price, bringing the city authority’s land sale revenue this year to a 10-year low.
The Hong Kong Lands Department awarded a 19,000-square-meter (204,500 square feet) parcel on Lantau Island to the sole bidder, Sino Group, for HK$203.8 million ($26 million) in the final land tender.
With a gross floor area of 81,800 square feet for residential development, the price translates to HK$2,492 per square foot ($319), which is about 80% lower than the land price paid five years ago in the same area and marks an eight-year low for residential land prices in Hong Kong.
The final deal brought the Hong Kong government’s total land sale revenue to HK$13.4 billion this year, down 53% from 2022 and the lowest since 2010.
Background: Hong Kong’s once-lucrative land market experienced a deep chill this year as developers remained hesitant to buy in face of the economic slowdown and high interest rates.
The city government put up eight parcels for sale this year, including seven for residential development and one for industrial use. Auctions for three plots failed while the rests were sold for low prices.
Weak land sales have piled pressure on the government. Accounting firm PwC estimates that Hong Kong will record a deficit of HK$110 billion in the 2023/24 fiscal year, significantly exceeding the projected HK$54.4 billion figure in the initial budget.
Financial Secretary Paul Chan acknowledged challenges facing Hong Kong’s economy and the government’s finances. The adjustment in the property market leads to a more cautious land sale market, which is a natural phenomenon, he said, adding that the situation will be temporary.
Contact reporter Han Wei (weihan@caixin.com)
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