Land in Hong Kong is leased or otherwise held from the Government of the Hong Kong Special Administrative Region. New leases of land are usually granted for a term of 50 years from the date of grant at a premium and subject to the payment from the date of grant of an annual rent equivalent to 3 per cent of the rateable value of the property at that date, adjusted in step with any changes in the rateable value thereafter.

While government land is usually sold by public auction, sale by public tender is also used in certain circumstances, such as for petrol filling station sites or where the Government wishes to examine in advance detailed proposals, as in the tender of the former Marine Police Station in Tsim Sha Tsui for commercial development which involved heritage preservation.

In appropriate cases, land may be made available by private treaty grant. In these direct grant cases, the premium charged varies from nominal (as in the case of non-profit-making schools) to full market value (as in the case of public utility companies).

In October 2003, the Government released a statement on the implementation and consolidation of housing policy. This included the decision to resume the sale of land (suspended in November 2002) through the operation of the Application List System whereby interested parties make guaranteed bids for sites on the Application List in order to trigger an auction or tender. This land sale mechanism was significantly enhanced during the year with the introduction in March and June of various measures which resulted in a 30 per cent reduction in processing time. The deposit requirement has also been simplified and a bid equivalent to a minimum of only 80 per cent of the assessed market value of the site is now accepted as a trigger to initiate the sale process.

During the year, three housing sites (with a total area of 2.80 hectares), one commercial site (with an area of 0.47 hectares) and six sites for petrol filling stations (with a total area of 0.49 hectares) were sold at a total premium amounting to $12.49 billion.

In addition to land supply from the Government, existing privately held land leases may be amended, normally at a premium, on lease-holders' initiatives to provide for a more intensive or different type of development in accordance with the prevailing planning intentions. These amendments are effected by either lease modification or land exchange. Other exchanges of land may be entered into by the Government for various reasons such as the rectification of lot boundaries. During the year, 88 lease modification and land exchange transactions were concluded, involving a total of 285.68 hectares.