Chinese cities experiment with new approach to land sales while Hong Kong sticks with highest-bidder model

By Pearl Liu pearl.liu@scmp.com / SCMP | July 12, 2019 10:22 AM SGT
Local authorities in many mainland cities are exploring new ways of awarding land to developers as they seek to curb property prices, throwing the spotlight on Hong Kong's long-established practice of simply picking the highest ­bidder.
Among the new land sale models, some apply administrative limits on how much developers can charge for completed units as a way to help maintain ­affordability, while others include requirements for public housing or picking bidders offering close to an average price rather than the highest offer.
As Hong Kong struggles with curbing sky-high property prices " average home prices have jumped 10.4 per cent in the first five months this year " analysts said the city should take a leaf out of the mainland cities' book.
"Chinese cities are rolling out efficient ways to curb land prices, and eventually homes prices, meanwhile the SAR government has not put proper effort in consultation and studying new methods," said Hannah Jeong, head of valuation and advisory at Colliers International.
"Hong Kong does not necessarily need to copy the exact approach used by mainland governments, but its needs to scrap the simple way of only selling for highest price."
Successive record prices at government land sales in Hong Kong have been fuelled by the land sales model which rewards the highest bidder.
Hong Kong government land sales are expected to fetch HK$143 billion this year, or about 22.8 per cent of the city's overall revenue target. Last year, it generated HK$116 billion or about 20 per cent of its total revenue from land sales.
Unlike mainland China, where residential prices are ­subject to local government ­approval, Hong Kong developers are free to set their own prices.
A construction site in Shenzhen. The city will select winning bids for a recently completed land tender on the basis of how much space developers allocate for government-funded housing within their proposed project development plans. Photo: AFP alt=A construction site in Shenzhen. The city will select winning bids for a recently completed land tender on the basis of how much space developers allocate for government-funded housing within their proposed project development plans. Photo: AFP
In the mainland meanwhile, the city of Hangzhou has placed caps on how much developers can charge for finished homes as well as limits on how much they can charge for interior finishes as part of the sale conditions for nine sites that will close for tender on July 29 and 30.
Shenzhen set a price ceiling on five plots in a tender which closed on June 24. The winning...