Land Price Concerning People In Hong Kong Commerce Essay

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Land price has always been concerned by people in Hong Kong. For the government, the high and low of the price affect the government revenue. For general people, land price can influence the flat price, hence affects their affordability to have a house. For speculators and developers, the land price can have a consequence on their income through investment. During the high tide of the land price, it creates a lot of wealth to some of the people, as well as the government, through selling of land. It is regarded as one of the economic pillars of Hong Kong.

The price of a land is often determined by demand and supply, a simple economic theory. The demand is controlled by the quality of the land, such as transportation, view, size and distance to locally unwanted land use (Lau, Giridharan, & Ganesan, 2005). The land with better accessibility with good scenery can be sold with good price as every developer wants to develop it to build houses to make profit. The demand is great but the supply of these kind of good quality land is limited it will push up the price. Vice versa, land which is remote and close to locally unwanted land use will sell at a lower price as people are not willing to stay there.

Although physical factors would affect the high and low of the land price, human factors cannot be ignored. Since the British government, it has adopted a 'high land-premium policy'. The objective of this policy is to sell more land in a higher price when the economy is good, to ensure higher economic benefit, rather than sell it to meet population growth. It guarantees the government revenue so that it can provide education, health care service, housing and other services to the public. The people in Hong Kong generally welcome to this policy (Chen, 2010). After the reunification with China, the government of HKSAR continue to adopt this policy as a major source of the government's revenue.

After the economic recession in 2002, the Hong Kong Government had stopped selling the government land to the developers, in order to stabilize the economy until the mid of 2004. However, without the land supply from the land sell of the Hong Kong government, the land developers have limited land to build houses (Wang, 2004). Even though the government has resumed land selling since 2004, the supply of land cannot meet the demand of the developers. The land price and also the flat price in Hong Kong (which two of them have a close relationship) start to grow up steadily since then.

Figure 1 Land sold at HK$1.63b for the site at 3 and 5 Ede Road (Source: HK Gov. News)

In late 2008, an 'economic tsunami' swiped across the world. The US government has adopted 'Quantitative Easing Monetary Policy' (which colloquially means printing more bank notes) to save the economy from collapsing. The policy has a great effect to world economy. A huge amount of 'Hot Money' in the world is created for speculators to invest (Wong, 2010). Some of the 'Hot Money' is invested into the property market in Asia. In China, the land price and flat price has been boost up significantly by the speculators in these two years. In Hong Kong, the site at 3 and 5 Ede Road were sold at nearly HK$18,000 per square foot (around HK$580,500 per square metre) in October 2010, which breaks the price record in Kowloon residential market (Liu, 2010).

With such a high price, it is questionable whether the land deserves the price or just because of speculation. This is the main reason to make me interested to have a research in relating this topic.


This research aims at finding out physical factors and human factors, which one has higher weighting in affecting the land price in Hong Kong by using GIS-approach. The first part of the research would evaluate how the physical factors and human factors affecting the land price.

The second part would find out how the land price is manipulated by the physical and human factors. In addition, the research is going to analyse the reasons behind why the physical factors or human factors has a higher weighting (greater influence). The research is going to include some case studies of land auctions in Hong Kong in recent years as examples, to explain the relationship between land price and the factors. It is essential to understand the factors because they have played a significant role in formulating the land price.

The third part, which is the final part of the research, is going to have an extended discussion on the effects of 'high land-premium policy' to the society of Hong Kong. The government has adopted 'high land-premium policy' since the British Government, as mentioned before, in order to sell the land at a higher price to support large government expenditure. This policy indeed helps the government to have more money to provide benefits to the society, but every coin has two sides, negative effects cannot be ignored. This research is going to find out the disadvantages of this policy as well.

Research questions and Assumptions

The core of the research question is whether the high land price in recent year deserves the price (physical factors) or just because of speculation (human factors). The research question will be divided into the following parts for detail discussion. The following questions follow a question word.

The first one is to identify what physical factors and human factors are contributing to the land price. Without identify them, the research cannot make evaluations to the factors and their weighting. The factors would be referred to the literature and the reality of Hong Kong.

The second question is how do the physical factors and human factors affecting the land price in Hong Kong? My assumption: physical factors still have a higher weighting in land price, no matter how human factors manipulate or speculate. In other words, human factors cannot make a profitable price for a bad land.

If physical factors have more effect on land price, which one has a higher contribution to the land price in Hong Kong among the physical factors? My assumption: transportation is the major factor. This is because the

Similarly, which human factor has a higher contribution to land price in Hong Kong? My assumption: the government factor is the major one. It is because the government is the one who have land reserve to sell. It can influence the price by controlling the demand and supply. Furthermore, the government can propose some measures, such as law, to impose controls or restrictions to developers in developing the land.

Currently, the Hong Kong government adopts 'high land-premium policy' as the main policy to sell the land at a higher price. The fourth question, which is an extended discussion, will be why the government adopt this policy? Does 'high land-premium policy' bring positive impacts or vice versa to the society of Hong Kong? My assumption: it brings positive impacts. This is because the government budget from land selling is significant every year.

These subordinate research questions are important in discussing the core question: whether the high land price is just because of excellent physical factors or just because of speculation. The answer will be revealed in the result part of this research.

Definition of study area

Figure 2 The relief of 18 districts of Hong Kong

The study area of this research focuses on the land of the Hong Kong Special Administrative Region (HKSAR). The HKSAR is located at the southern part of People's Republic of China. With an area of 1,140 square kilometres, it has a population around 7 million (Hong Kong Information Services Department, 2010). The climate of HKSAR is sub-tropical with annual temperature 23.1 degree Celsius and annual rainfall around 2400 millimetre (Hong Kong Observatory, 2010).

The relief of Hong Kong is hilly with limited flat land along the sea. Nearly one-third of the land in Hong Kong is hilly, forcing the government to remove the slope and reclamination to increase flat land for development (Au, 1998). Therefore, land resource is a precious in this little area with many people living in. It is one of the reasons why the land price is high in Hong Kong.

Research Significance

For economic aspect, the research can reveal how physical factors and human factors, in certain extent, affect the land price and which of them weights heavier. Therefore, the research helps us to understand the mechanism of the land price formulation.

For social aspect, it can also understand how the government and speculators influence the land price. When they influence the land price to increase to an unreasonable or alerting level, it has a higher risk of creating 'bubble'. When the bubble burst, it can create disastrous effect to the society. Therefore, it is important that the public should understand whether the flats that will be built on that land in the future, are worth to buy or not. This is one of the answers which the research could tell.

Furthermore, it can help us to understand the pros and cons of the 'high land-premium policy', which will be discussed in this research. This policy is related to every people in Hong Kong as it can affect the government policy.

Literature Review


The literature review would consist of several parts. First it defines the keyword of the research title. Second it explains how the land price formulates. Third it discusses the factors affecting the land price. Fourth it traces the current government policy for selling a land. The final part identifies the knowledge gap.

Definition of a residential land

The first part is the definition of the land. The simple definition of 'land' is the solid ground without covered by water (Oxford English Dictionary). However, the law of Hong Kong has a wider definition that land can refer to both covered and without covered by water. In addition, 'land' specifically refers to a building erected on a piece of land (Department of Justice, 2005). As this research is focusing the situation in Hong Kong, it uses the definition of the law in Hong Kong to ease misunderstanding. For 'residential land', it refers to a land is used for constructing dwellings for residents (Evert, 2010).

The characteristics of land can be identified into three main categories, which are physical, economic and institutional aspects (Shilling, 2002). For physical characteristics, land is physically immoveable by human and it is fixed to a geographic location. To make an example, Hong Kong is located at southern China, it cannot be moved to northern China. Land cannot be destroyed because it is a space. The things on the land surface can be destroyed but the destructed surface is still there. Finally, no two lands are the same. Even though two lands are very similar, differences can be found in terms of relief, micro-climate, size and shape. Therefore, this makes every land is unique, and hence every land has its own price.

From the above physical factors, it leads to the following economic characteristics. The first is scarcity. As the Earth has a defined surface area, the land supply is constant and cannot be increased or reduced. This causes limited supply of land, which can be reflected by the price. In Hong Kong, land is scare. In order to increase the living area, high rise buildings are constructed to increase surface area vertically. That is the reasons why a large population can stay on a small piece of land.

Lands are


What is bid-rent mechanism (What and How)

As mentioned previously, one of the economic characteristics of a land is the competiveness. The owner of the land sells the land to the buyer who can offer the highest price among the buyers, assuming that it is a free market and everyone is economic man.

The bid-rent mechanism can be

land rent refers to the payment of a tribute to the land owner.

Physical factors affecting the land price (What and How)

The centre of the city, train or subway stations, major roads, schools, parks, and the coast

Human factors affecting the land price (What and How)

Current government policy to land sell

Procedures to sell a land in Hong Kong

Knowledge Gap