In September, 1984, Britain and China concluded theJoint Declaration on the Future of Hong Kong.TheJoint Declarationguarantees the continual practice of capitalism and a high degree of autonomy for Hong Kong for a period of 50 years after 1997. It helped to rebuild confidence and caused property prices to rise. However, Annex HI of theJoint Declarationplaces severe restraints on the present government, limiting its ability to respond to market trends and generate funds from land sales. This paper seeks to look at some of these effects. It is argued that there is very little room for the present government to maneouvre and that even now the constraints imposed by theJoint Declarationare affecting the land market in Hong Kong. Higher land prices, a slower rate of horizontal expansion of the city and a greater intensity of land use are likely consequences of the newly imposed contraints. The recent emphasis on inner city development and redevelopment vis‐a‐vis a new town development strategy is in part attributable to theJoint Declarat