Auctioneer Graham Martin Ross raises his gavel during the Hong Kong government land auction Tuesday. Jerome Favre / Bloomberg News

Low sale price for Tung Chung land will not delay June, July auctions

Financial Secretary John Tsang said Wednesday the government will continue to boost land supply in the city in a bid to keep home prices stable, despite developers' lukewarm response to Tuesday's land auction, which fetched a price far below market consensus.

"The result of the auction has reflected the market situation," Tsang said, fielding questions by media about the lackluster result of the first land auction in the current fiscal year starting April 01.

A Tung Chung residential site was sold to private developer Nan Fung Group for only HK$3.42 billion at the Tuesday auction, far below the market consensus of HK$3.7 billion to HK$5 billion, after other bidders virtually stayed on the sidelines.

Some market watchers speculate that developers could have played a trick on the government to show their discontent with the latter's recent measures to curb soaring home prices, which remain on an uptrend this year after a 27 percent surge last year due mainly to ample liquidity and home tight supply.

Undeterred by the tepid response from developers, Tsang pledged that the government will continue to increase land supply in the coming months.

"We will have land sales in June and July. The sales will keep coming," he told reporters, adding that "we hope to maintain stable development in the housing market".

He noted that increasing land supply is one of the four initiatives, announced in his budget speech delivered earlier this year, aimed at maintaining a healthy housing market.

"We will continue to increase land supply to balance out the shortage of development sites during the past few years," he said Wednesday.

Separately, Secretary for Development Carrie Lam also told media on the same day that the government's drive for optimizing land supply in the city hasn't changed after developers' anemic response to the Tuesday land auction.

"Our determination to optimize land supply hasn't changed," she said, replying to questions about the lower-than-expected winning bid for the Tung Chung site.

Measures to achieve the optimization will include maintaining an effective application list mechanism, she elaborated.

Under the application list system, a site could be triggered for auction when the government receives an application with a "satisfactory" minimum bid price.

Another measure is for the government to initiate and hold open tenders for certain sites in the application list when no developer successfully triggers an auction, Secretary Lam added.

She described the winning bid for the Tung Chung site as a "normal" price, saying "we successfully sold the plot at a market price."

Both Secretary Tsang and Secretary Lam insisted that the government will not sell land cheaply, as land resources are part of the city's public assets.

Tsang declined to indicate the government's expectation for the result of its next land auction, to be held at the end of this month, saying that "we have no such thing as a high land-premium or low land-premium policy. But we will retain any site, if the auction fails to fetch a price that will meet our minimum requirement." He did not elaborate on the "minimum requirement".

China Daily

(HK Edition 05/13/2010 page2)