Analyst: Government land sale bidding heats up, retail sales expected to remain sluggish next year | Lianhe Zaobao

The collective sale market for real estate is facing a cold wind this year, with five projects sold so far, one more than last year.

However, since these are small private residential projects and industrial buildings, the prices are not as high as the large commercial buildings and private residential projects sold last year. The total transaction amount for collective sales this year is HKD 350.39 million, a significant drop of 84.4% year-on-year.

Developers Avoid Collective Sales and Turn to Government Land Sales

Real estate analysts point out that the asking prices for collective sale projects are high, coupled with the government's plan to release more new private residential sites, leading developers to avoid acquiring collective sale projects. Therefore, the collective sale market is expected to remain weak next year.

The collective sale projects sold in the first half of this year include River Valley Apartments, Ching Shine Industrial Building, and MacPherson Industrial Complex, but the collective sale market in the second half has been "chilly," with fewer projects being tendered and even fewer transactions completed.

Four projects were launched in the market in the second half of the year, among which Chiku Mansions and Starpoint 319 were successfully sold, with transaction prices of HKD 22 million and HKD 55.3 million, respectively. The other two are Singapore Shopping Centre and Pek Chuan Building. These two commercial buildings are still looking for buyers.

Last year was a "prosperous year" for large projects, with transactions including Concorde Hotel and Shopping Mall, Katong Plaza, Thomson View, and Delfi Orchard, with a total transaction amount of HKD 2.25 billion.

Huang Xianyang, head of the Singapore and Southeast Asia research department at Cushman & Wakefield, said in an interview with Lianhe Zaobao that the transaction amount for collective sales has significantly decreased compared to last year.

"As housing prices continue to rise, the cost for sellers to change homes is higher, and developers are cautious under the cooling measures in the real estate market, especially due to the restrictions of the Additional Buyer’s Stamp Duty (ABSD). Since collective sales transactions are usually more complex and take longer to launch redevelopment projects, government land sales have become the preferred way for developers to reserve land."

He pointed out that the average number of bidders for each plot of land that closed this year, including those for executing condominium plots, has risen to 5.1, up from 2.9 in 2024 Xu Xiaofen, the head of industrial investment consulting at Yidi, shares a similar view. She believes that government land sales are strong competitors for collective sale projects, with as many as 20 sites on the official list this year, in addition to 12 alternative sites.

Sellers' Asking Prices Are High, Reducing Success Rates

Another reason developers are choosing government land is that the asking prices for collective sale projects are not low.

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Xu Xiaofen said, "Although there are still many collective sale projects launched in the market, there is still a gap between the owners' asking prices and the prices developers are willing to pay, leading to a lower success rate for collective sales."

The government is reviewing the collective sale policies and regulations under the Land Titles (Strata) Act, which may lower the threshold for owners to agree to collective sales.

Huang Xiuying, head of research and content at PropNex, believes that if regulations are relaxed, more projects are likely to go to tender, but whether they can be successfully transacted will still depend on market conditions and owners' price expectations.

"Developers will only choose sites that are well-located, reasonably priced, and commercially viable in terms of redevelopment potential and profitability; only then will developers enter the collective sale market."

It takes two to tango; to attract developers, there must be sufficient land purchase options.

Xu Xiaofen pointed out that some projects fail to obtain enough owner consent for collective sales, not only due to dissatisfaction with the collective sale price but also because some owners believe the profit distribution is unfair. Additionally, some owners, being foreign nationals, are concerned about having to pay an additional 60% buyer's stamp duty when purchasing alternative housing, thus unwilling to sell their existing homes.

Xu Xiaofen hopes that the government can adjust the additional buyer's stamp duty for foreign owners of collective sale projects and introduce clearer and fairer profit distribution guidelines, especially for profit distribution methods suitable for integrated development projects

Industry: Demand for Collective Sales Expected to Remain Weak Next Year

As the new year approaches, interviewed analysts believe that developers will continue to be very cautious when selecting collective sale projects.

Huang Xiuying predicts that the demand for collective sales of private residential projects will remain weak, as there is still a gap in price expectations between homeowners and developers, while resale prices continue to rise, and the prices of alternative properties are high, leading homeowners to maintain their asking prices.

Huang Xianyang is more optimistic. He stated that loan interest rates are expected to decline further, which may encourage developers to be more aggressive in land acquisition. Developers who fail to bid for government land will also consider acquiring collective sale projects, especially small projects in prime locations that have obtained the consent of all homeowners for collective sale