Hong Kong To Freeze Commercial Land Sales
HONG KONG – With the Chinese territory continuing to see high office vacancy levels, authorities in Hong Kong have announced that they are temporarily halting the sale of commercial sites for land tenders to be held in Q4 2023, reported Bloomberg on Thursday noon (4 October, SGT).
“It’s reasonable for us to pause” the sale of commercial plots in the fiscal third quarter ending 31 December 2023, stated Secretary for Development Bernadette Linn on Wednesday. “We see that the vacancy for commercial space is on average at 10 percent or more,” she added.
Hong Kong’s government is facing a dilemma due to the beleaguered office market. On one hand, divesting land is currently impractical as developers will likely submit low bids due to their pessimism amidst the prevailing market situation.
The local authorities last sold a commercial site in March 2023, when Sun Hung Kai Properties acquired a land plot in Mong Kok for HK$4.7 billion (US$600 million), which is significantly lower than its prior valuation of over HK$20 billion during the preceding year.
On the other hand, holding onto commercial sites until the office market rebounds will deprive Hong Kong of much-needed revenue as the city tries to fix its finances that is presently being impacted by its sluggish economy.
Sales of sites have long been a major source of income for the city government. This has enabled Hong Kong to maintain its low tax system, but the slump in the city’s residential and commercial property segments have negatively impacted its revenue.
As a matter of fact, Hong Kong’s government has merely hit 18 percent of its annual targeted land sale revenue of HK$85 billion for the first half of the year, based on data from Midland Realty. The city’s financial year will end in March 2024.
Real estate consultancy CBRE also revealed that while office rental demand marginally improved in Q3 2023, Hong Kong’s overall office vacancy rate is currently at 15.8 percent, near its historical high. This has dragged down rents of Grade A office buildings, which has dipped 3.6 percent since the start of the year.
