LCQ13: Land premium assessment mechanism

Following is a question by the Hon Abraham Shek Lai-him and a written reply by the Secretary for Development, Mrs Carrie Lam, in the Legislative Council today (May 6):


Under the current land administration policy, where a lease modification confers an increase in land value, premium is payable on the part of the developer.  To assess the amount of premium payable, the Lands Department (LandsD) will deduct the relevant projected development costs and the developer's profit (calculated as a certain percentage of the development costs) from the enhancement in land value.  It is learnt that LandsD raised the percentage at the end of last year, and commencement of private development projects can thus be expected to be expedited, and it also helps create more job opportunities.  In this connection, will the Government inform this Council:

(a) what measures are in place to reduce further the differences between the Government and developers over premium amount, so as to reduce the time taken for the premium valuation process;

(b) given that there are comments that the Government has failed to follow closely the latest property market trend in premium assessment, whether the authorities will regularly review the aforesaid profit percentage and make timely adjustment according to market conditions; and

(c) given that there are comments that premium assessment currently undertaken by LandsD lacks transparency, whether the authorities will consider reviewing the relevant mechanism and introducing an expert determination mechanism, so as to enable more development projects to commence as early as possible?


Mr President,

I respond to your three-part question in one-go as follows –

As a general principle for premium assessment, land is assessed at full market value, taking into account the restrictions as imposed under the lease and other statutory provisions such as the relevant Outline Zoning Plans and Buildings Ordinance.  The valuation is conducted by professional estate surveyors in the Lands Department (LandsD).  When assessing the land value for land transactions, the professional estate surveyors in LandsD take into account a number of cost and revenue aspects, including the prevailing sale price of the completed development, the development costs of the project, the development period and the profit margin.  Professional estate surveyors in LandsD and professional valuers in the private market adopt the same professional practices and both draw on the relevant market evidence in assessing land premium.

LandsD's professional valuers are vigilant towards the market changes which may impact on the land premium assessment.  In the light of the market situation, LandsD has as from December 2008 increased the profit margin assumed in land premium assessment process by 10% as follows –

(a) residential development – from 10% to 20%;

(b) commercial/hotel development – from 15% to 25%; and

(c) industrial development – from 20% to 30%.

LandsD will continue to keep a close watch over the market situation to ensure that its land premium assessment will, as always, reflect a market value of the land involved.

The current assessment mechanism has already got a certain degree of transparency.  If a developer disagrees with the amount of the premium as assessed by LandsD, he may appeal against the premium on the basis of the procedures promulgated in LandsD's Practice Notes.  On receipt of such an appeal, the case officer in LandsD may communicate with the developer or his agent on a non-committal and without prejudice basis and in this context may exchange views with the developer or his agent on matters relevant to the premium assessment including, among others, the relevant market transaction evidence.  The developer and/or his agent may be invited to attend LandsD's subsequent Valuation Conference meeting convened to consider the premium appeal for the purpose of elaborating on his appeal.  If the developer disagrees with the amount of the revised premium determined by LandsD based on his first appeal, he may submit subsequent appeals and the procedure for deciding on any such subsequent appeals is similar to that of the first appeal.  In the case of the second appeal, the developer may opt to apply for a fast track procedure by submitting a counter offer supported by justifications within a specified time limit.  If such an application is approved, LandsD will aim to issue its response to the counter offer within 24 working days.  Such fast track procedure however will not be available to any such third appeal and subsequent appeals.

The arrangements for determining land premium as explained above have evolved from experience over the years, taking into account the views expressed by not only the property market, but also by other sectors of the community.  The present arrangements, we believe, achieve the objective of providing a fair and reasonably quick and transparent professional premium assessment mechanism.  We do not consider it appropriate nor necessary to introduce an expert determination mechanism outside LandsD.

Ends/Wednesday, May 6, 2009
Issued at HKT 15:00