Property Developers’ Major Cost Concerns Arising from Planning Regulations under a High Land-Price Policy

Abstract

The transaction costs (TC) in property development incurred by complying with planning regulations can be unpredictable and extremely high, especially under a high land-price policy in which property developers have to pay approximately 60% of the total project cost, the land price, on day one. The aim of this paper is to identify the property developers’ primary cost concerns arising from the planning regulations in Hong Kong, which is subject to a high land-price policy. Sixteen structured interviews with experienced senior industry practitioners were performed to collect their insights. The qualitative research analytical tool NVivo was used for the data analysis. Results showed that developers’ primary cost concerns arose out of regulatory uncertainties attributable to unclear and unexplained approval and rejection criteria and to regulatory ambiguities. Such uncertainties can cause project delays and defer developers’ investment returns. Understanding the regulatory TCs of planning regulations would enable project stakeholders to take early actions to reduce or avoid such costs. The research findings would also help policy-makers to formulate more effective strategies to reduce unnecessary regulatory costs and eventually enhance policy efficiency.