A study on the effectiveness and impact of charging standard rates for land premium in the New Territories

Abstract

In light of the Northern Metropolis vision as emphasised in various Policy Addresses, the enduring debate over the accumulation of land bank by major developers revolves around the untapped potential of the rural land reserves. This dissertation provided a comprehensive analysis on the origins and effectiveness of implementing standard premium rates for the conversion of rural land in the New Territories into urban development. The intention behind this arrangement is to expedite the land conversion process through a simplified procedure, providing enhanced clarity for the assessment of land premium. Private developments, in addition to the adjoining public facilities, are thereby encouraged for the overall advancement of the designated New Development Districts. The primary objective of this study is to investigate the impacts resulting from the two-year implementation of the standard rates system in assessing land premium for lease modification in the Kwu Tung North and Fanling North New Development Areas. A systematic evaluation framework was employed to assess the effectiveness of the arrangement, considering criteria such as the extent of conformance in achieving its intended objectives, occurrence of side effects, efficiency, equity, financial considerations, technical and administrative feasibility, as well as its acceptability by stakeholders. A mixed research method was adopted to collect opinions from professionals in the real estate industry through purposive sampling questionnaires and supplemented by semi-structured interviews. Findings from the survey research were analysed using the 5-level Likert scale and coding system to highlight the factors undiscovered in the literature and desktop studies. In addressing the contributory factors of market participation in the standard rates approach, simplicity and transparency in lease modification procedures, clarity in time and premium, as well as financial incentives possessed well-established impacts. One interfering factor identified was the restricted timeframe governed by the statutory land resumption programme. External factors affecting the conclusion of lease modifications include incompatible infrastructure and other public facilities support, unfavourable site configuration, potential emergence of extensive land supply and marginalised developer’s profit. The most influential factor was concluded as the property market outlook. For evaluation of effectiveness, the results were multifold. The expressed objectives to enhance certainty and transparency of lease modification were positively received. Ex-gratia compensation served to the adversely affected parties could improve Pareto-efficiency, but the overall efficiency of the development system remained unresolved. Equity in the considerations of public revenue forgone were found to be lacking, but the expedited developments with the potential to create social value was plausible. Cost reduction proved to be a challenge in both the public and private sector, whereas the feasibility consideration of reducing the workloads of LandsD was unlikely to be achieved. Meanwhile, acceptability was considered high due to the preference for a more open and transparent land development process, as well as a coordinated development intensity. However, upfront fiscal financial burden might cause public concerns. The side effects include speculative buying and accumulation of agricultural land in the New Territories. Given the significance of rural-urban transformation in addressing mid- to long-term housing supply in Hong Kong, recommendations were sought from professional respondents, namely more frequent review and adjustment of the standard rates, increase the manpower in processing lease modification in the Government, enhancing support on infrastructure and public facilities, as well as promoting social responsibility of developers.