Lower land premiums seen as developer caution persists

Fewer successful tenders are expected despite continued demand for selected projects.

The Hong Kong government is expected to collect less land premium revenue this fiscal year as it takes a more measured approach to land sales amidst cautious developer sentiment, property consulting firm CBRE said.

The property consultancy estimates land premium revenue for FY2026/27 will reach $14b to $16b, below the government's target of about $18b.

CBRE expects around seven residential sites to be launched during the fiscal year, with only four to five likely to be successfully tendered.

No commercial sites have been included in this year's land sale programme, reflecting continued caution in the office and retail sectors.

"Hong Kong's land sale programme this year reflects a more pragmatic alignment with prevailing market conditions," said executive director and head of valuation & advisory services, CBRE Hong Kong Hannah Jeong.

"Whilst headline revenue may fall short of target, this also signals a disciplined approach to land release that prioritises long-term market stability over short-term outperformance," Jeong said.

CBRE said several residential sites may continue to face development challenges.

The Ta Kwu Ling site has remained on successive land sale lists since 2023 because of planning and development constraints, whilst the Cape Road site in Stanley could attract fewer bidders due to higher financing costs and increased stamp duties on properties valued at $100m or more.

The consultancy said the pilot large-scale land disposal project in the Hung Shui Kiu/Ha Tsuen New Development Area received at least two proposals after the tender closed on 3 July, indicating continued developer interest in Northern Metropolis projects.

Two more large-scale land disposal sites are expected to be launched in 2027.

Meanwhile, CBRE said the Tung Chung Area 106A site attracted stronger-than-expected interest and achieved a higher land price than anticipated.

It also expects the Shek Mun residential sites to attract developers because of their urban location and mid-market appeal.

Senior director for valuation & advisory Services for CBRE Hong Kong Eddie Tsui said the lower land premium should be viewed in the context of the government's supply strategy.

"It indicates that the pipeline is being managed rather than accelerated," Tsui said.

"What Hong Kong's housing market needs is right supply in appropriate locations and at levels that support sustainable development economics,” he added.

CBRE expects residential completions to remain at around 12,000 to 15,000 units annually through 2027 and 2028, with the slower pace of land disposal helping moderate future supply.

The consultancy maintained its forecast for Hong Kong residential property prices to increase 8% to 10% in 2026.

However, it noted that prices have already risen 7.4% year to date, leaving limited upside for the rest of the year.

By contrast, the rental market is expected to remain stronger.

CBRE forecasts residential rents will rise 5% to 8% in 2026, supported by continued talent inflows and growing numbers of non-local students.

Leasing activity is also expected to strengthen in the third quarter as student arrivals and corporate relocations increase during the summer period.