A recent speech at a breakfast meeting organised by the British Chamber of Commerce cast an entirely new light on the land supply situation in Hong Kong, at least as far as I had previously understood it.
The speaker was Roger Nissim, formerly a senior official in the Lands Department, now an academic at Hong Kong University. His research shows that just three of our major property developers have amassed a combined land bank in the New Territories of over 90 million square feet designated for agricultural use. According to their most recent annual reports, Henderson, Sun Hung Kai Properties, and New World have acquired 44.5, 30 and 18 million square feet respectively.
Taken together with lesser holdings by other developers (no prizes for guessing their names) it is clear that a total of well over 100 million square feet has been squirrelled away awaiting development opportunities. Space on this scale if utilised properly would have a major beneficial impact on Hong Kong’s housing situation.
Two things need to happen before the land can be put to more productive use. First, the zoning needs to be changed to something more appropriate such as residential or commercial. Secondly the designated use of the land as specified in the lease needs to be amended after payment of a suitable modification premium to the government.
The way our system works at present, the timing of development of this huge resource is left largely in the hands of the developers. With their expert knowledge of the property market cycle, they will seek Town Planning Board approval to amend the zoning and agree the modification premium with the Lands Department at a time when land prices are low, so as to minimise their outlay. Ideally they will also be bringing the completed properties onto the market for sale at a time when prices are high.
It should be stressed at this point, in fairness to all concerned, that there is nothing in the slightest illegal or improper about what I have described. It is the way the system has operated for many decades. The question is whether our community should allow things to roll forward in the same way in future bearing in mind the long waiting list for public housing, and the – still sky high -- price of flats in the private sector.
At a time when population densities in the urban area are being further increased by raising plot ratios and diverting land intended for other uses to residential, and even our precious country parks are under threat, the answer is surely no.
The time has come for the government to take a more aggressive approach. It must take to the Town Planning Board its own proposals for several satellite towns in the New Territories. Each must have a comprehensive layout covering Public Rental Housing, Home Ownership Scheme flats as well as private apartments, commercial development plus all relevant Government Institution and Community uses. Most importantly, the administration must be in charge of the timing and be prepared to resume for a public purpose all the privately held land within the plan’s boundaries as a last resort if necessary.
The present owners may squeal that they are being denied an opportunity to take part in the developments. This need not be the case. It should be possible to work out an arrangement whereby existing owners can surrender their holdings in exchange for plots in the new layouts, with approval to build. Thus the government would not need to pay cash to acquire the land. The developer would need to pay to modify the lease, but could do so either in cash or by surrendering extra land to make up for the additional value.
Any owner who did not wish to develop any of the sites available in the layout, or was not prepared to meet the government’s development timetable, would still have the option of cash compensation at a rate appropriate for agricultural land. Thus private property rights would still be respected.
But the most important point is the government would have seized control over timing of development. The public interest would take priority over, but still allow for, private profit.
There were many other interesting aspects of Nissim’s presentation, for example why the Census and Statistics Department’s forecast for future population differed by 800,000 from the figure used in the forecast of housing demand. But sufficient unto the day.