Hong Kong – In view of the government’s pilot scheme for charging land premium at standard rates, Savills commented:
The Development Bureau announced on 4 March 2021 that a pilot scheme for charging land premiums at standard rates for lease modifications for the redevelopment of industrial buildings to other usages will commence on 15 March 2021. Aiming to provide industrial building owners an alternative to the conventional mechanism for land premium assessment and negotiations, the new initiative will run for a period of two years with the standard rates remaining unchanged and applicable for industrial buildings completed before 1987. The government further stated that the scheme is "not to provide premium concessions for owners, but to enhance the certainty on land premiums payable to expedite revitalisation of industrial buildings".
Savills welcomes the government's pilot scheme. Mr. Charles Chan, Managing Director of Savills Valuation and Professional Services commented, "We believe the standard rates will give investors visibility and certainty on land premium calculations, allowing them to better estimate the total investment costs. The scheme will also help simplifying the procedure of lease modification for the change of industrial usage and accelerating the redevelopment process. But land owners can still opt to have their cases processed using the existing land premium assessment approach and negotiate with the government on the final land premium considerations."
Savills also believes the introduction of the new scheme will act as a catalyst to the industrial investment market, which has seen a pick-up in activity since the beginning of the year. The transaction volume of HKD 1.16 billion in 2021 so far was largely driven by the elimination of the double stamp duty on commercial properties in late November 2020. Savills expects clearer and simpler land premium procedures will help investors' decision making and likely draw more investors looking for redevelopment opportunities to the en-bloc industrial market.
Mr. James Siu, Deputy Managing Director, Head of Kowloon said, "The pilot scheme will be beneficial to the real estate industry at large. As the calculation of land premium is more readily accessible now, this will help investors' decision making and we expect the total transaction volume for the full year of 2021 to exceed that of 2020."