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Hong Kong authorities could suspend the sales of commercial sites for a second year due to a lack of demand, the development minister has said, while rejecting the notion that the government was pressured by developers to shelve the Lantau reclamation plan. Secretary for Development Bernadette Linn Hon-ho made the prediction even as the city’s grade A office spaces saw a slight drop in vacancy rates between the second and third quarters. Financial Secretary Paul Chan Mo-po announced in February that authorities would stop selling commercial land this year to allow the market to absorb the existing supply. “It will be quite unlikely [for the government] to sell commercial sites [next year], as the financial secretary has instructed us to review the sales of commercial sites in the next few years. Currently, the commercial floor areas available are also abundant,” Linn told the Post in an exclusive interview. “We should follow the policy … we will not earn any land premium even if we blindly put the commercial sites on the market as the tender would fail; it has to be demand driven.” Figures from real estate consultancy firm CBRE Hong Kong showed vacancy rates for grade A office spaces fell from 17.4 per cent in the second quarter to 17.1 per cent in the third quarter. Linn added that the coming residential sites would mostly be located in new development areas in the New Territories, unlike small sites in urban areas such as Tuen Mun and Tsuen Wan that were recently made available. But she said the final decision on whether to sell commercial sites next year would depend on the finalisation of the land sales programme following an annual review. Finance chief Chan made a conservative land premium forecast in the latest annual budget, saying he expected the figure to rise progressively to 2 per cent of the city’s gross domestic product from the 2026-27 financial year, which is lower than the 20-year average ratio of 3.3 per cent. The land revenue for the current financial year is expected to reach HK$21 billion (US$2.7 billion), an increase of 55.3 per cent from the revised 2024-25 estimate of HK$13.5 billion. Last month, Linn revealed that the plan to build three artificial islands off Lantau would be shelved due to the lack of “necessary conditions”. Three months before the decision was announced, lawmaker and Real Estate Developers Association secretary general Louis Loong Hon-biu warned that the initiative could drive down bidding prices for land set aside for the Northern Metropolis megaproject. The HK$580 billion artificial islands project was initially proposed more than a decade ago and involved the creation of the city’s third central business district (CBD), with the islands to accommodate up to 210,000 homes for 550,000 residents. “It is untrue that the government is not doing it because developers do not want us to launch too many sites,” Linn said in the interview. “We always said the government should take the lead, but at the same time, we also need to consider if the market can take it. This is why we slowed down.” She stressed that the reclamation project was not completely off the table as the plan was still part of longer-term efforts to boost the land supply, even if the current administration, whose term ends in 2027, could not press ahead with it. “We did not give up the project. It is no longer in the next ten-year land supply, but it is still part of the supply of 2048 … The feasibility study conducted won’t go to waste … the reclamation can be started when the government can raise enough capital,” Linn said. She explained that authorities had to shelve the project as both the government and the market had limited resources and insufficient cash flow. Pressing ahead with both the Northern Metropolis and the artificial islands scheme would have been challenging and divided resources, she said. “Also, does the reclamation project still need to emphasise the development of a CBD? Will we see a different need later? There are already a lot of lands reserved for industry developments in the Northern Metropolis,” she said, adding that the town planning process was always evolving. But Linn said the Northern Metropolis would not become a CBD as it planned to use land in a more diverse manner that included the integration of villages and urban developments. “It will blend the countryside with town developments; it will be a place with flavour,” she said. Linn held off from commenting on plans by the Urban Renewal Authority (URA) to cut cash compensation for homeowners affected by redevelopments, saying the exact proposals would only be formed after the authority’s review with the Development Bureau. But she said the government would ensure owners’ property interests were protected. She hinted that, in the future, owners who did not want cash compensation could get a newly completed flat immediately instead of waiting for the compensated flat to be built under the current arrangement. Linn added that the authority’s decanting site in Tseung Kwan O would be available for construction starting next year, and that she would not rule out granting more sites to the cash-strapped authority to help speed up redevelopments. “The URA is our good partner … we cannot ask them to offer reasonable compensation and take good care of owners and occupants affected without offering our support when it’s in financial difficulties,” she said.
