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Jake's View
PUBLISHED : Sunday, 07 July, 2013, 12:00am
UPDATED : Sunday, 07 July, 2013, 1:39am

Flats for a million apiece: why did the bureaucrats reject it?

The government has turned down property tycoon Lee Shau-kee's offer to donate land for homes and urged landowners with similar plans to work with non-profit organisations such as the Housing Society instead.

South China Morning Post
July 4

I may be wrong about this but nowhere in all the reports of this rejection have I seen any sign of the government offering a word of thanks to Mr Lee for his public spirit in offering to build 10,000 flats for young people at only HK$1 million each.

You would think he was due at least a thank you. For a long time now we have heard legislators bemoan the impossible entry cost to young people of owning a home while bureaucrats wring their hands and do no more than hint that it is the fault of speculators and developers.

Then along comes a prime example of the nefarious developer with an offer to build flats for young people at prices representing construction costs alone, at no profit to himself, if only the government would do its part by waiving land premiums. And what do our bureaucrats say?

They say no. They don't even say thank you to Mr Lee for his offer. They just say no and then a day later offer a regurgitation of an earlier scheme to build several towns of misery that will be filled by social security recipients alone, as the locations are too remote to attract anyone who has the choice. Not another mention is made of flats for HK$1 million each.

Thus it comes down to a scurrilous journalist to offer that well deserved thank you to Mr Lee and I do it not only for his demonstration of public spirit but for the fact that he showed up all the bureaucrats' lamentations on housing prices as just so many crocodile tears.

I don't believe they ever seriously considered Mr Lee's offer. I think the reason they took over a month to respond was purely to construct the illusion of taking it seriously and to give themselves plenty of time to dream up excuses.

Take that one about how they had to eliminate consideration of one large plot because part of it had already been designated for a petrol station. We are talking of an offering of 10,000 flats at prices not seen since near the bottom of the property market 10 years ago. Was a tentative designation on a planning map enough to refuse it?

Surely there must be some way around this slight difficulty as there must also be around the objection that it is discriminatory to make these flats available to young people only. For all his occasional gaffes, Mr Lee is a reasonable man. Surely someone could have talked to him and worked out a legally acceptable scheme.

Similarly, I cannot see that the government would have lost much by agreeing to waive the lease conversion premiums. We are running a fiscal surplus of HK$80 billion a year at the moment and we have free fiscal reserves of about HK$1.6 trillion. We have plenty of money.

Yes, waiving premium could conceivably cost the public purse tens of billions of dollars if other developers were to line up to follow Mr Lee's example, as there were indications they would do.

But for a cause that the government loudly professes to espouse, with ample money available to support that cause, this could have been a winner. Flats for a million apiece, why did the bureaucrats reject it rather than look for ways to make it work?

I think it was for that most compelling of all reasons, to wit that this scheme threatened the bureaucrats themselves. To agree to it would have been to undermine their cherished administrative procedures and their position in society. If developers can give us flats at HK$1 million apiece why look to government for them?

It is my experience from decades in the investment business that developers will always overbuild massively if given the opportunity. There are two bottlenecks, however, to this potential flood of housing. They are land and building permission, both of which are under control of government and jealously hoarded.

My thanks, thus, to Mr Lee for the demonstration he has given us that government utterances are once again just so much sanctimonious prattle.

jake.vanderkamp@scmp.com

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This article is now closed to comments

alai001
You are entitled to your opinion, and same for others. After all, the government, having all the facts and details, has come to the conclusion to reject Mr. Lee's offer. Does that tell you something? I am of the opinion that what Mr. Lee purchased was agricultural land, and he should stick to his original purpose: to farm the land.
whymak
Of course you're all entitled to your opinions, but not to facts, logic and reason.
impala
The government owns all the land in Hong Kong. There is plenty of unused land in the government's land bank already earmarked for residential development. And if it starts rezoning, then there is plenty more.

Offering land to the government is like carrying water to the sea.

Mr Lee's paid very little for these plots, and it is worth very little as it is zoned for agricultural use. His move was a well calculated one: if he could have get the government to start playing the rezoning game, many of his other agricultural land holdings will be worth much, much more as well, even if we take into account a rezoning premium. And then we are not even talking yet about the profit he can make from the buildings he can then begin to build on them.

Why do you think Henderson holds so much agricultural land in the first place? Because Mr Lee loves rice paddies and cabbages? To give it away? Of course not. It is purely because of the hard-to-argue-with view that sooner or later, the demand for land in Hong Kong will reach a point that this land will be needed for development. And then he will cash in. The only thing he is probably afraid of, is that he may kick the bucket before this happens, hence he tried to speed things up a little.
rpasea
There is plenty of land but a dearth of efficient land use policies.
John Adams
Mr Van der Kamp : you are normally one of the most savvy writers, but this time you got it wrong.
Lee Shau-Kee only made this 'generous' offer because his innate greed sees some bigger money-winning opportunity further down the road.
Either that or his conscience is finally starting to trouble him at night.
If so, good thing - he and most of HK's property barons do not deserve to sleep well.
This is the man who perpetrated the 39 Conduit Rd scandal (and numerous other such scams that scrape the barrel of what is just barely legal in HK's property-cartel driven world).
Leopards don't change their spots.
.
PS: Whatever happened to that opinion survey that REDA commissioned a couple of years ago ? Was it so treble - X- rated that it cannot even be mentioned, let alone published?
johnyuan
I learned in my Chinese history class in my primary school in Hong Kong in the late 50s about conscience. Let me make this connecting the dots. Conscience is a western import for Chinese culture. It was first introduced by a Chinese scholar who had studied abroad in early 1920s (?). Conscience was then translated into Chinese. Lee, LKS and the like may not had much exposure in their formative years to such concept. This older generation unfortunately instead believes in ‘When in commerce, one talk the commerce talk’. It was frequently used in Hong Kong at the time when I was growing up. It is not only how business people justified their dishonest conduct, but the worst thing of all is holding it up as the principle in conducting business. Formal corporate social responsibility came late in the US and unfortunately such notion is deteriorating fast. The last thing we should do is to sing an apparent white knight that is a devil that causes the ills all along. Flats for a million apiece is cheap for an income of few thousands a month for the youths?
impala
Is it this one?
****www.reda.hk/sites/www.reda.hk/files/Consumers%20Perception%20Audit.pdf

Subtitle: In which 30% of the respondents stated they rated the performance of the real estate industry and the HKSAR government property policy as 'bad,' and 60% as 'average.' The % for 'good' is not even stated, probably because it was embarrassingly deep the low single digits.

And this was in 2010, when property prices were high, but not as completely out of whack as now.
johnyuan
Lee is leveraging his land offer etc for government to invest in infrastructure for his other land around it -- very transparent motive. As equally transparent, without explanation though, the government just said no.
Perhaps the government realizes that it can build more public housings if premium on the conversion is charged. The number of lost public rentals will multiply when more developers want the same treatment. So why give up the potential revenue from all the premium conversions? The infrastructure has to be put in anyway by government for its proposed new town anyway.
No to Lee but without saying thanks if not because of the bean counting contest, it is just merely a cultural habit. Chinese don’t have ‘thanks’, ‘excuse me’ and ‘please’ in one’s normal lexicons. Jake, you’ve been in Hong Kong long enough to know that. So get over it. Give us instead some numbers and graphs to explain why did the government turned down Lee’s offer – with or without an appropriate ‘thanks’ uttered. But I will again to suggest to CY Leung to exercise the government’s power in taking private property back. May be the government’s no to Lee has much to do with that. Leung may be waiting for public’s sentiment to rise to do just that. So as Lee for his 'donation'.
whymak
Like him or not, we should thank Lee Shau Kee. Of all people, you should be least surprised by bureaucracy's perpetual struggle to maintain power. I am speaking from experience.
I was hired into the corporate world as mid career manager of marketing systems development for then the largest company in the world -- in revenues and profits. We had layers of bureaucracy no different from most governments.
The majority of our marketing, sales and decision support systems used IBM mainframes and software. It meant high cost and inefficiency. I was charged with developing applications and transferring both knowhow and Unix applications to IT shops in other divisions.
My first effort in building a customer satisfaction system went without a hitch. I plugged a PhD out of Bell Labs statistics department to help design surveyed samples and analyze data while I wrote the entire turnkey interactive system using mostly Unix scripts. It demonstrated successfully how a small system costing 3 man-years could be up and running in just a few weeks with Unix.
I ran into the bureaucratic buzz saw during my next assignment. A capable staff under me developed a monitoring system for the embedded base far superior to IBM's IMS. The operations manager turned down the free system financed by the corporate budget.
Why did they stonewall me? They were not facing a deadline in implementing corporate requirements definition. More importantly, they didn't want to lower the headcount.
aplucky1
u cannot be this naive
in ANY Other civilized nation this lee POS would be vilified in the press for his dirty deals
in hkg he is a god
he is giving nothing away for nothing - disgusting pig

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