Hong Kong land sales struggle as developers stay cautious: analysts

The latest bidding results for Sha Tin Town Lot No. 625 reflected tepid developer interest.

Hong Kong’s latest government land sale programme faces a challenging market as developer sentiment remains cautious, despite adjustments aimed at boosting participation.

Both Colliers and CBRE analysts noted that whilst the government has taken steps to address market concerns, soft demand, high development costs, and uncertain land conditions continue to weigh on investor confidence.

The latest bidding results for Sha Tin Town Lot No. 625 reflected tepid developer interest, with Colliers’ Head of Research Kathy Lee noting that high construction costs and developers’ existing unsold inventories made new land acquisitions less attractive​.

According to CBRE, the government fell short of expectations in its 2024/25 land sales, with only four out of ten planned sites successfully sold.

This resulted in actual revenue of $13.5b-$19.5b below initial projections​. Analysts warn that market conditions remain weak, which could impact the success of upcoming sales.

In response to market feedback, the Hong Kong government has announced a revised land sale programme for 2025/26, which includes eight residential sites expected to generate $21b in revenue​.

Colliers welcomed the inclusion of a residential site in Tai Wai and a Hung Shui Kiu (HSK) site for Multi-Storey Buildings (MSBs) for modern industries.

These changes, along with adjusted tender terms, are expected to increase developer interest, particularly for the Tai Wai site, which is situated in a mature community with limited new supply​.

Another key challenge in the land sale programme is the government’s push to develop MSBs in Hung Shui Kiu as part of the Northern Metropolis development.

Colliers noted that the government adjusted the plot ratio and reduced the proportion of floor space allocated to displaced brownfield operations, a move aimed at reducing construction costs and attracting more bidders​.

However, CBRE’s Head of Valuation & Advisory Services, Hannah Jeong, pointed out that the decision to delay the development of two planned MSBs was unavoidable, given the sluggish land market and uncertain land resumption timelines.

Jeong warned further delays in land resumption could create a funding gap, affecting the broader Northern Metropolis development​.

Despite ongoing challenges, analysts note signs of improving confidence in the market. Colliers highlighted that, since the government’s 2024 Policy Address and adjustments to the mortgage loan-to-value ratio, property transaction volumes have increased

CBRE also pointed to new policy measures, such as an in-situ land exchange approach, which could ease cash flow pressures on developers and lower the risk of failed tenders​.