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The Hong Kong real estate market encountered severe challenges in the first quarter of this year. According to the latest data from the Lands Department, land sale revenue plummeted to just HK$190 million, a decrease of nearly 90% compared to the same period last year. The primary reason for this sharp decline was the government's suspension of residential and commercial land sales in the previous quarter, resulting in only one site for an electric vehicle charging station being tendered this quarter. In contrast, land sale revenue was as high as HK$1.37 billion in the same period last year.

The government had originally budgeted HK$33 billion in land sale revenue for the entire year, but achieving only HK$190 million in the first quarter falls short of 1% of its budget. This situation underscores the dramatic slowdown in market activity and the lag in land sale plans, posing a severe test for the Hong Kong government, which has long relied on land sale revenue to fill fiscal budget deficits.

Despite the current situation, the government still has three sites under tender, including multi-storey industrial land in Yuen Long, private residential land in Sha Tin's Siu Lek Yuen, and Lok Tin Kee land in Chai Wan. These plots, if successfully tendered, are expected to generate land sale revenue ranging from HK$3.82 billion to HK$6.35 billion, potentially partly mitigating the current revenue shortfall.

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Cheung Kiu-chu, Managing Director of Hong Liang Consulting and Appraisal, pointed out that the current weak residential demand in the market directly affects the government's ability to generate revenue through land sales, and developers' enthusiasm for land bidding has correspondingly declined. He suggested that the government consider launching some prime sites in urban areas in future land sale plans, such as luxury residential areas in Stanley's Wong Ma Kok or the runway area in Kai Tak, to balance and enhance land sale revenue while reducing the risk of project failure.

Another expert in the Hong Kong real estate market, Chao Kwok-kwong, Managing Director of Valuation and Professional Consultancy at First Pacific Davies, stated that it is currently difficult to accurately predict whether land sale revenue for the whole year will meet expectations, especially given the current market softness. The government may consider reducing the frequency of land sales to avoid exacerbating market deterioration. He further noted that high-value land plots valued over HK$3 billion are currently not easy to sell and are more suitable for launching smaller to medium-sized projects.

In fact, high-value land plots currently available on the market include the corner plot on Huan Jiao Road in Stanley and Plot 5 in Zone 4B in Kai Tak, with a total estimated value ranging from HK$9.7 billion to HK$17.5 billion. If the government successfully launches and sells these plots in the coming quarters, it would significantly narrow the current shortfall in land sale revenue.

In the first two quarters of this year, a small number of plots were launched, including a small plot in Siu Lek Yuen, Sha Tin, involving the supply of 280 units, and New World (00016)’s project to fill land price gaps in the north of Fanling, adding supply for 400 units. Overall, land supply this quarter is expected to range between 1,000 and 2,000 units.

The market expects that in the next quarter, four plots will be launched, involving 2,670 units, including the Housing Authority's project on Kai Tak Road, Kowloon City, which is expected to involve 810 units. Overall, the land supply in the first two quarters of the year is expected to reach between 4,500 and 5,500 units, accounting for over 40% of the annual target.