Tender for private developers to build subsidised homes receives just 1 bid, as surveyor warns of market risks
Hong Kong Free Press
A tender for real estate developers to build subsidised homes has received just one bid under a pilot scheme that will see the government partnering with the private sector to alleviate Hong Kong’s housing shortage.
Chairperson of the Hong Kong Institute of Surveyors Francis Lam said on Monday that developers faced substantial risk as flats under it will be sold at just 65 per cent of the market price.
The project is part of the Private Subsidised Sale Flats pilot scheme first unveiled by Chief Executive John Lee during his maiden policy address in 2022. Under the scheme, private developers would build flats according to quality and size specifications set by the authorities, with the flats to be sold at a discounted rate.
Secretary for Housing Winnie Ho said last year that public-private partnerships would tap into market forces to enhance quantity, speed, efficiency, and quality
The tender for the 0.5-hectare site on Cheung Man Road in Chai Wan, the first of three sites under the scheme, received one bid. Bidding for the site – which will provide 700 flats – closed last Friday.
Lam told RTHK on Monday that the prices of the flats could fluctuate depending on the market value, adding that the “uncertainty” around the developers’ potential income would affect their willingness to bid for the project.
“If the market is going up, you won’t be so worried, but now that the market isn’t doing well, it’s hard to know what would happen,” Lam said in Cantonese.
At least 70 per cent of flats under the pilot programme must have a floor area of more than 375 square feet, and all flats must have an area of more than 280 square feet.
Predecessor axed
Lam said the new system differed from the pilot scheme’s predecessor, the Private Sector Participation Scheme (PSPS), which was introduced in 1977 and axed in 2002. Under the PSPS, the government bought back unsold flats from developers at a fixed price.
Under the new pilot scheme, the government will not buy back unsold units, meaning developers would have to absorb the risks associated with poor sales, Lam said.
The government said last year that not having a buyback mechanism was an attempt to incentivise high-quality construction.
Regarding whether the second site under the pilot scheme, in Tung Chung East, could see a successful launch, Lam said it would be difficult to estimate the market price, as there was only public rental housing in the new development area.
The 1.4-hectare site in Tung Chung’s Area 122 is expected to provide around 1,600 subsidised flats.
Lam said reinstating the buyback mechanism would give developers and contractors a better idea of their potential returns.
After the government revealed details of the pilot scheme last year, commercial real estate firm JLL last July voiced similar concerns about the lack of a buyback mechanism, noting that developers may even have to launch at prices below the breakeven point.
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