In the 2021 Policy Address released by the Chief Executive today, Savills welcomed the series of measures announced to increase land supply and those on development strategies and on infrastructure and transportation.
Northern Metropolis Development Strategy
Charles Chan, Managing Director of Savills Valuation and Professional Services, believed that the development strategy can have an immediate cooling impact on the city’s red-hot residential property market, as this can address the issue of “no land available”, which is a common belief among the general public. However, the ability to execute the strategy will be critical so that the proposed infrastructure, mass transportation facilities, etc., can be built to match the development of the metropolis, especially as it is due to accommodate a population of about 2.5 million. The government should propose development blueprint and schedule as soon as possible to reassure the general public that the land supply will be available to the market in the near future so that they do not need to rush to purchase property.
On Lowering the Compulsory Sale Thresholds
Charles Chan welcomed the suggestion and believed that this will further speed up the pace of redevelopment. Charles said, “While the thresholds had previously been lowered from 90% to 80%, it was well received by the market and the environment of a lot of old urban areas have been significantly enhanced. The suggested further lowering will encourage more owners to redevelop their properties. I suggest the legislation can be revised to authorize the Chief Executive and the Executive Council to formulate subsidiary legislation to decide on the designated thresholds for specific projects case by case, with the lowest threshold not be lower than 60%.”
Extension of the Standardization of Land Premium Assessment
Charles Chan commented that this initiative will attract more developers to conduct landuse re-zoning. He said, “The government may consider taking the standard rate for redevelopment of industrial buildings as a basis, and applying it to high-density residential projects as a pilot, and at the same time setting the minimum plot ratio to encourage developers to plan for high density projects.” He believes this can effectively speed up the development of brownfield sites and hence the residential supply.
Charles added that the high level of land premium and the prolonged negotiations have discouraged developers from conducting re-zoning in the past. If the standard rate can be set at a reasonable level, re-zoning can be speeded up and more residential supply can be made available. Furthermore, he believed that the unlocking of Tso/ Tong land is an important step to bring about more potential land supply in future.
Revitalization of industrial buildings
The launch of the Industrial Building Revitalization 2.0 plan has been well received by developers, especially the measure to relax the plot ratio of old industrial buildings by 20%. According to Savills’ statistics, as of the end of September 2021, 57 planning applications have been approved to increase the plot ratio for redevelopment, providing a gross floor area of approximately 12.7 million square feet.
Regarding the government’s extension of the revitalization measures of industrial buildings to October 2024, Savills believes that the current hot investment atmosphere and the transactions in industrial buildings will continue to be supported and active. As of the end of September 2021, significant industrial transactions involving en-bloc or majority ownership amounted to HKD15.6 billion, doubles the figure of 2020. Investors will continue to look for suitable properties in the market. As old, single-owned industrial buildings for redevelopment become less available, investors may switch to acquiring individual title ownerships for redevelopment instead.