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  • Nov 25, 2014
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HOUSING

Tycoon Lee Shau-kee in talks to donate land for cheap flats for young

PUBLISHED : Monday, 03 June, 2013, 4:34pm
UPDATED : Tuesday, 04 June, 2013, 2:34am
 

Henderson Land Development chairman Lee Shau-kee has confirmed he is in talks with the government to donate a plot of farmland in Fanling to build affordable housing for young people.

The site, which will provide more than 1,000 flats, is one of seven sites offered by Lee to the government, Lee said after the annual general meeting of his listed flagship Henderson Land Development yesterday.

"I am getting old, already 80-something. I know how to make money, but I also want to use it meaningfully," he said, dismissing speculation his donation was intended to benefit his business.

Lee said the government had picked a Fanling site - which could have been used to build a petrol station - from seven and was studying the possibility.

The site, covering more than 100,000 square feet and owned by his private company, was worth HK$200 million to HK$300 million, he said.

His wish was that it would yield flats of 300 sq ft to be sold for HK$1 million each, taking into account that the construction cost would be about HK$3,000 per square foot. His company would not carry out the construction.

Lee said the government should not charge a premium for changing the land use, otherwise the price of the flats could not be as low as HK$1 million.

The tycoon first publicly raised the idea in January, saying he would be willing to build small homes on his land in the New Territories and sell them cheaply to first-time buyers.

The seven sites he wants to donate, costing between HK$800 million and HK$1 billion, could produce a total of 10,000 flats. Some are owned by Henderson Land.

"Some minority shareholders may not agree to donate the company's sites to the government for free. But I will compensate them if [those] are donated," Lee said.

A government spokesman said the developer's proposal would be "actively considered" but the government would also have to take into account whether the site met town planning, transport and environmental requirements.

Government housing adviser Marco Wu Moon-hoi said that if the site was taken, it should fall under existing policies of subsidised housing, which do not set an age limit on the beneficiaries, in order to prevent confusion. He said adjustments could be made within the current policies to address young people's needs.

Democratic Party lawmaker James To Kun-sun and Ho Hei-wah of the Society for Community Organisation welcomed Lee's proposal, saying the government should allow flexibility in using the site. "As long as Lee is paying a larger share of costs than the government in providing the flats, the donor should have a say in how the land is used," To said.

 

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impala
Your math and logic is way off.

When developers pay a price for residential land in Hong Kong, the quoted per square foot HKD price is the premium they pay to the government for the saleable floor area they will ultimately deliver (a tight range of which is also stipulated when the land is put up for tender or auction).

To make it crystal clear (although I am simplifying): when you read on these pages that Developer X paid HKD 5,000 per square foot for a Kai Tak residential site, and he will build 40 storeys worth of residences on the plot, he will pay HKD 5,000 x 40 for every square foot = HKD 200,000 per square foot of actual soil. Not HKD 5,000 / 40 = HKD 125 per square foot.
Developer's margins are good (20% or so is not unusual) but not 800-1000%. Don't be ridiculous.

Furthermore, you don't buy land in Hong Kong. All land belongs to the government. Period. You pay a premium, which is effectively a lease (for 50 years or more) for the right to develop and use the land. And that premium is calculated based on what you do with the land. And what you can do with the land is, as mentioned, clearly defined in the terms of the tender/auction.

Also, while I am sure Henderson is rounding up those construction costs for their own interest, you can't compare the cost of building a three-storey NT village house with the cost of building a high rise residential tower. The major costs for the latter are its foundations. Most of the concrete goes underground.
Sugelanren
To Peggy Sito, SCMP. Could you just confirm that this donation is an altruistic one and that Henderson Land has no land plots nearby which would benefit if the government put in the infrastructure (water, roads etc) to support the development?
HK-Explorer
Of course Henderson does. Also he will gain good will from the government when it comes to negotiating future conversions from farmland to residential. He will have paid 50 million. It is probably now worth 150 million. He will then gain billions from making the donation.
And he will make billions while giving the persona of mr GOOD guy and people will love him. He is doing nothing good - just publicity hound.
caractacus
What a porkie pie! The cost of construction is not $3,000 per sq foot, or anywhere like it. For example, a 3 storey, New Territories Exempted (small) House costs about HK$1 million to build. The value of a private plot of land is between $200,000 up to nowadays the outrageous sum of $600,000. So maximum total cost including buying the land = HK$1,600,000 divided by 3 floors at 700 sq feet each = $ about $761 per sq foot. But if you are an indigenous villager living abroad you can get a free grant of government land and costs of construction alone are only about $476 per sq foot.
If a developer buys a plot of land at say, $16,000 per sq ft and half of it is usable for building the net cost is $32,000 per sq ft, but then you divide the cost of the land by the number of floors the developer builds, so $32,000 divided by 40 floors = $800 per sq ft for the land, plus say, $500 per sq ft = construction cost plus say, a bit more for surrounding infrastructure say, let's be generous, $200 per sq ft, = maximum cost including the land = $1,500 per sq ft. And the selling price? About $12,000 to $15,000 per sq ft. Stamp duty is passed on to the poor sap home buyer. So developers' profit? Between about 800% to 1,000%. There is Hong Kong's housing crisis in a nutshell. Is there anywhere else in the world where residential property is poorer value for money and such a shameful scam against the public?
mcha290
As jve has explained, this calculation is fundamentally wrong because the land premium per square foot refers to the floor area of the building, not the area of the site.
ejmciii
At least he is doing something other than complaining, which is more than we can say for some who shall remain brainless.
HK-Explorer
He is increasing his profits at the expense of the people of Hong Kong. He is not giving anything away for free.
If someone buys an apartment for HK 1 mil which would normally cost 1.5 mil if the land premium was paid. The 0.5 mil land premium per house would have gone to the government and used for government projects. So it is pretty much a 0.5 million subsidy to the person lucky enough to receive the property.
So the person can turn around and resell the 1 mil house for 1.5 mil immediately!!! Exactly the same as HOS.
Pretty much he is giving away HK$200 mil and asking the government to give away HK$400,000 mil and take on the construction. Big loss to the people of HK. Great big gain from Henderson as their other property becomes more valuable and the government will need to repay the "so called favor".
Marketing alone this is worth HK $200 mill
lxpang
No hostility intended, but are you saying that Mr. Lee should not do this and should just use the land in his usual profit seeking way?
impala
It is all rather strange.

Firstly, let's not forget the government owns all the land in Hong Kong. Mr Lee is not giving anything back in that sense. He is merely willing to denounce his lease of the land in question, which currently is only earmarked for agricultural use anyway. He can't develop it, so it is really only worth a fraction of the theoretical value he states there.

Secondly, he is 'donating' this land to the government on the condition that the government then rezones it to residential use and builds (cheap) housing on it, or at least finds someone who will.

Now it is all fine and nice. Good publicity and perhaps it eases Mr Lee's conscious somewhat.

But from the point of view of the government and the people of Hong Kong, what is the added value of this? The government has plenty of land. It owns all the land (ok, minus the St John's Cathedral), and has a giant reserve of unleased plots that it could develop at any time under the same conditions that Mr Lee proposes here. If it wished, the government could tomorrow decide to develop 'cheap' 300 sq ft flats on 20 sites all over Hong Kong. Or 100 sites. It doesn't need Mr Lee to donate a couple of plots of agricultural land to do this.

Mr Lee is in effect carrying water (back) to the sea.
impala
The bottom line is that there is very little he can do with this land. It is zoned for agricultural use, so apart from crop yield, it has little value, and he didn't pay much for it either. Mr Lee bought this kind of land in the hope that one day the government would agree to rezone it for residential use. So he is really sacrificing very little.

What I am saying is is that Mr Lee's gesture is hollow. The government has plenty of (agricultural and residential land). It controls the land supply. It owns all the land. It doesn't need Mr Lee's agricultural plots to increase supply if it wanted to. If it would like to waive the land premium and build cheap houses on any of it (that is what Mr Lee is proposing), they could do it with any of the hundreds (thousands?) of vacant plots in their land bank. They don't need Mr Lee's 'donation' for it.

If Mr Lee would really like to be generous and help out with the crazy property prices, he would get some the expensive residential zoned plots he has in his portfolio, build housing on it and sell those at cost price. That would be real charity.

As mentioned in another comment, this is the equivalent bringing your small pet goat to the meat market, offering it to the butchers and asking them to sell its meat to the poor at a low price. You seem charitable, but meanwhile, you keep your 50 cows safely in their stable, and ignore the fact that the butchers have tons of meat lying around they could donate to the poor anyway.

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