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HK gov't eases land sale rules
(China Daily)
Updated: 2005-06-22 09:23

The Hong Kong government bowed to the city's powerful developers yesterday by making it easier for them to buy government land through auctions at a time when some fear rising interest rates threaten a property market boom.

Several developers had complained about a system that only allows an open auction to proceed if a company first makes a bid matching the government's unpublished valuation for a piece of land.

With no land auctions so far this fiscal year, Hong Kong's Lands Department will now arrange an auction if a developer makes a bid of at least 80 per cent of the government's valuation.

"Through this adjustment, I hope more sites can be successfully taken out of the application list and put on auction," Patrick Lau, head of the Lands Department, told a news conference.

Despite the change, the government will still only sell at auction if the winning bid surpasses its own valuation.

Authorities use land sales to raise revenue to offset low taxes and to try to control the property market, which is key to the economy in the crowded city of 6.9 million people.

In a sign of increasing confidence in a fast-climbing property market, the government offered 22 hectares on 35 plots for sale in the fiscal year starting in March, compared to 13.1 hectares offered in the last fiscal year.

Although many developers are keen to acquire land to take advantage of a surge in home buying, none has so far met the government's asking price for any of the plots.

Property values in Hong Kong have jumped more than 10 per cent this year and around 75 per cent since a trough in 2003, boosting the earnings of major developers such as Sun Hung Kai Properties, Cheung Kong Holdings and Henderson Land.

But some analysts think rising mortgage rates at Hong Kong banks, which want to offset higher costs of funding, herald an end to the property boom.

The last land auction, in February, fetched three times the asking price and double most analysts' forecasts.

It took total earnings from land auctions in the last fiscal year to nearly HK$20 billion (US$2.57 billion) for a government that has run a fiscal deficit in the last four years.

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