Whether Development Secretary Paul Chan Mo-po should resign over the scandal surrounding his farmland in Kwu Tung North is neither here nor there for Hong Kong property market watchers. What I am interested in is the Chan family's property market investment strategy.
He and his wife Frieda Hui Po-ming's company, Harvest Charm Development, owned two flats in Tai Kok Tsui that were subdivided into more than three units each.
One of the flats was subdivided into two bed spaces and two small units. Based on the purchase price of HK$610,000 and the rental income, they achieved a yield of 4 per cent when they bought the flat in 1994.
That is more than what you get owning a flat in a large housing estate.
Now, the monthly rent for a 100 square foot unit is about HK$3,000, according to the Society for Community Organisation, a social welfare group.
If the Chan family hadn't last year sold their stake in the company investing in old flats, they could have been enjoying a rental yield of around 18 per cent on each flat, plus the increase in the properties' value.
This example helps explain why many investors like to buy old flats. Despite the upside capital appreciation potential of them being low, their rental yield is high and they are relatively cheap to buy.
Flat owners also get the chance to sell at a good price when developers acquire old buildings for redevelopment. Old flats attract those looking for a long-term investment and a high rental return.
Still, the investment is risky because such flats are less resilient in the face of property market falls. Developers, moreover, are no longer actively buying older properties since the government implemented property market cooling measures in October last year.
The Chan family's other interesting investment is farmland in Kwu Tung North. He and his family bought a 15,000 sq ft plot for HK$350,000 in 1994.
A surveyor said the farmland cost only a few dollars per square foot only in the 1970s and 1980s. Owners can earn a lot of money if the government or developers want their site.
"Many people who bought farmland in the New Territories are waiting for the government to acquire their sites," said the surveyor.
"They are willing to wait eight to 10 years. The government will pay them HK$600 to HK$700 per square foot in order to build roads or other infrastructure. The landlords can generate lot of profit."
Such land still has upside potential, even if it is not connected to a road.
"But it has to be close to a road. If the government builds a new road that connects with your site, the value of the site will increase sharply," he added.
Landlords cannot profit if the site is zoned as a conservation area or a greenbelt. Such sites cannot be developed, unless there is a rezoning.
Farmland can be attractive for investors who want a low investment cost with potentially high returns.
Banks don't offer mortgages for farmland, and buyers of old flats have to make higher down payments if their bank is willing to offer a mortgage.
It's not a market for new property investors.
What this comes down to is that Hong Kong's housing policy, now in Chan's hands, is being run by a property investor.