2047 is not all that far away

Uncertainty brings fear. It was true in the 1990s as the handover approached. And it is true now as the years eat into the 50-year transition period - already almost a third gone and the halfway mark looming within a decade - leaving many questions yet to be answered.

Academics and other specialists say these questions need to be resolved now, particularly for issues stretching beyond 2047, such as property ownership.

They say it's more important to address the uncertainties in a way that can curb irrational fears and speculation than to gaze into a crystal ball and try to get a picture of life after the Basic Law - the transitional mini-constitution - expires.

Crucially, what will happen to land and properties for which the land lease has expired and how will banks' mortgage lending policies be affected?

Also, will the city be plagued by a shrinking workforce and an ageing population and where will people retire? Will Hong Kong drift further from the mainland ideologically or converge with it? Will the legal system change?

A mainland legal specialist offered some reassurance, saying that stability would still be the first priority of the central government in deciding on Hong Kong's future, but other experts are less sanguine.

Chau Kwong-wing, a chair professor specialising in property development at the University of Hong Kong, says 50 years might seem a long time but there are risks for property owners and those wanting to buy a flat in the next few years.

'The uncertainties will be felt when people are looking for a 30-year mortgage five years from now. Will banks offer a mortgage extending beyond 2047?' Chau asks.

Land leases granted before the Sino-British Joint Declaration was signed in 1984 have a renewal clause but most arranged since then - in particular those granted after 1997 - do not.

The Basic Law says land leases expiring after the handover without a right of renewal will be dealt with in accordance with laws and policies formulated by the city.

About two weeks after the handover, with the approval of the Executive Council, the government announced that non-renewable leases would, upon expiry and at the government's sole discretion, be extended for a term of 50 years without payment of an additional premium. But an annual government rent of 3 per cent of the rateable value would be charged from the date of extension.

'The current practice of discretionary renewal by the Lands Department has made the lease perpetual in effect. It has given the public a false impression that they can own a flat forever,' Chau said. 'But it is not guaranteed to continue after the 50-year term. Will the leases be renewed? Will the owners face a much shorter lease and a much higher land rent?'

This is a particular problem for rural properties and those to the north of Boundary Street in Kowloon, in the territory leased to the British for 99 years that expired in 1997, as most of their leases will expire by 2047. Chau says the uncertainties might have an impact on property prices.

In the past, a price difference was seen in properties with different lease periods, he says. Those with a much longer lease, 999 years for example, sold for more than those with a shorter span. The price difference gradually disappeared when the department exercised its discretion to renew most land leases.

The Development Bureau says the Lands Department has extended 14 residential leases in the past 10 years, each for a term of 50 years and subject to the payment of land rent. But it stresses that owners with non-renewable leases do not have an automatic right of renewal.

Chau says the problem is getting nearer as the banks will have to decide by 2017, five years from now, if they should offer 30-year mortgages extending beyond 2047. He says the government should open talks with Beijing to minimise risks to flat owners.

Major banks in Hong Kong like Hang Seng and Standard Chartered have still not come up with a policy for mortgages extending beyond 2047. The longest offered by Hang Seng at present is up to 2042.

Chau warns that a more fundamental problem stems from a possible change in the legal system - whether Hong Kong courts will still have the power of final adjudication. 'It's common for owners to resort to the courts because a land lease is equivalent to a contract between the owner and the government.' he says. 'Adopting the continental law system currently working in the mainland would have an unpredictable impact on developments.'

Unlike common law, judges under continental law seldom refer to precedents for decisions. Adverse possession - by which an occupant of land can claim ownership after occupying it for specified period - is also not allowed in continental law, he adds.

A mainland legal expert familiar with the Basic Law says the central government would not sit idly by when uncertainties loomed from the expected expiry of the 'one country, two systems' principle.

'The central government will not allow some technical issues to undermine Hong Kong's economic development and social stability,' the expert says, speaking anonymously. He adds that Beijing has put forward the 'one country, two systems' formula with the aim of preserving Hong Kong's prosperity and stability. When 2047 becomes a hot issue and the public expects a definite answer, he does not rule out the possibility of Beijing making an 'appropriate response' in an attempt to guarantee the city's stability.

'The situation would be similar to the early 1980s when the central government put forward the 'one country, two systems' concept which aimed at setting the hearts of Hong Kong at ease,' the expert says.

'My understanding is that 'one country, two systems' concept is our country's long-term policy. The meaning of the system remaining unchanged for 50 years is maintaining the perpetuation of the capitalist system in Hong Kong. We should understand the matter from this perspective, rather than just focusing on mere figures.'

But assurances about keeping the status quo are not a panacea, especially when the city needs a vent to release the pressure caused by the ageing population.

Professor Wong Chack-kie, a social welfare specialist and associate director of Hong Kong Institute of Asia-Pacific Studies, says there is a much greater need for integration with the mainland as a way out for both retirees and the city.

Official projections show that residents aged 65 or over will account for more than a quarter of the population in 18 years, increasing from 13 per cent today to 28 per cent by 2039.

'There has been a tendency in the past 10 years that retirees are attracted to the lower cost of living and more spacious environment on the mainland and are opting to spend the rest of their years there, just like the British and Japanese retiring in Spain,' Wong says. 'If the trend continues, it solves part of the ageing problem by reducing pressure on the local health-care system.'

But he warns that people's desire to move north might diminish if nothing is done to improve the mainland medical service.

He wants to see policies encouraging local medical service providers like private hospitals to extend to Guangdong to serve retired Hongkongers and for local investment in homes for the elderly on the mainland.

While Wong argues that the city should seize opportunities to benefit from the convergence with the motherland, the director of the Centre for Civil Society Studies at the Chinese University, Chan Kin-man, advocates the opposite.

'Apart from gaining from its rocketing economy, we may yield more by influencing the mainland with our strengths, like good governance, high transparency and embracing core values including freedom of expression,' he says. 'The city has a role to play in leading the mainland to the path of civilisation, and we will benefit from it eventually.'

But he warns that, despite the gradual easing of anger towards mainland visitors, the fissures between the two places could deepen in the long run if nothing is done to increase mutual understanding.

Last year, mainlanders flooding into the city were dubbed 'locusts' by some Hongkongers as they were seen to be using up local resources, including swamping maternity services.

'It may go to another extreme that people want to break from the motherland in the future, at least ideologically, like what is happening in Taiwan,' Chan says.