Slow land sales a ground for concern
Editorial | Mary Ma 11 Jul 2024
The government has slowed down land sales, so far rolling out not even a single plot that can truly claim to be eye-catching. The only residential site marked for sale in the second quarter of this financial year is located in Sha Tin and is good enough for just 570 flats.
Income from land for the first quarter stood below HK$200 million, not including the revenue due to be generated by the first quarter's only residential site, also in Sha Tin, whose tender closes tomorrow.
Secretary for Development Bernadette Linn Hon-ho should monitor the outcome closely.
In his budget, Financial Secretary Paul Chan Mo-po forecast a revenue of HK$33 billion from land for the year. If it was considered a cautious estimate back then, it may look ambitious by now as land income has so far met less than 1 percent of the forecast.
Even though Linn said dollar numbers on the book did not necessarily reflect the whole sum as some revenues may not be booked yet, an income of HK$190 million in land premiums is a far cry from the projection.
The plot marked for sale in the second quarter sits at the junction of Sha Tin Wai Road and Siu Lek Yuen Road and measures 5,652 square meters.
Centaline is rather buoyant about this site, confident that it could fetch HK$5,000 per square foot.
Will this be the market price? It is an estimate and only the sum for which it is actually sold will be considered the market price. The tender outcome tomorrow will have a direct impact on the value of this second one.
Linn showed little concern about revenues from land sales while insisting that her primary goal is to maintain housing supply and support the economy.
But the question is: if she were the financial secretary, would she have offered a different view?
Government incomes mainly come from salaries tax, corporate tax and land premiums. Despite a drastic drop in land income in the first and very likely second quarter, the government has continued spending like before.
For the two months ended May 31, expenditure for the April-May period stood at HK$120.6 billion amid an overall income of HK$50.9 billion.
This widened the deficit gap carried forward from the last financial year by HK$77.5 billion in the first two months of the current year.
Although it is true that salaries and profit taxes are usually received towards the end of the year, a lack of progress in land sales remains a major concern.
According to official figures, as of March there were 32,000 cases of negative equity, which occurs when the value of a property becomes less than the remaining value of the mortgage.
This number would be much higher if mortgages secured with non-banking institutions were also considered.
It is feared that, unless property prices stabilize in the second half, the number of negative equity cases will continue to increase.
It can be predicted that, by that time, banks will exercise even greater caution in giving out new mortgage loans and that, in turn, will have a direct impact on the sale of flats in the primary and secondary markets.
Linn should be concerned about the progress of land sales.
Today's Standard
