Politics a barrier to plans to help alleviate Hong Kong’s housing shortage, tycoon Victor Li says
Government proposals for joint public and private development of farmland under scrutiny
Hong Kong tycoon Victor Li Tzar-kuoi sees political considerations as a major barrier to a government plan for joint public and private development of agricultural land for housing, casting doubt on whether the model could help boost home affordability in the city.
The comments by the head of Cheung Kong Infrastructure, part of the CK Hutchison conglomerate founded by his father and the city’s richest man, Li Ka-shing, are the first expression of reservations by a major property investor on the government’s proposals that it help developers build homes on their land.
“It would of course be fantastic if we could successfully execute public-private co-development projects, but I think this is not easy to pull off in today’s political environment,” Victor Li told reporters on Wednesday after the annual shareholders’ meeting of Cheung Kong Infrastructure.
The government proposals include such measures as having it provide infrastructure to bolster the economics of farmland conversion, and financial incentives. They form part of a broader initiative featuring some 18 options to address the city's projected shortfall of at least 1,200 hectares of land for housing and economic development for the next three decades.
The government-appointed Task Force on Land Supply last month launched a public consultation exercise on the proposals.
The city is already one of the least affordable places worldwide to own a home, but questions of conflicts of interest and collusion between developers and the government have dogged attempts to improve the situation.
In a reflection of the seriousness of the housing shortage, some legislators have said the government should invoke power it has under the Lands Resumption Ordinance to take back large pieces of undeveloped farmland and brownfield sites for housing development.
The ordinance allows the administration to forcibly claim any land in the city, with compensation for the owner, if the takeover is for public use. Li said that from the point of view of developers, public-private co-development would “certainly” be more profitable than models that involve the government taking back land.
CK Asset, the property division of the CK Hutchison conglomerate, is one of the smaller owners of farmland among Hong Kong developers, giving it less of a stake in the issue than its rivals.
It had 10.17 million square feet of farmland in the city as of the middle of last year, a quarter of the holdings of Henderson Land Development, a third of those of Sun Hung Kai Properties and just over half of those of New World Development, according to a report by brokerage CIMB.
A spokesman for Henderson Land said it would welcome collaboration with the government, but was still waiting for detailed proposals. The company is estimated to have spent HK$3.7 billion (US$471.4 million) last year on farmland conversion, according to a Morgan Stanley research report.
Another of the options in the task force’s proposals is to build housing above the Kwai Tsing container terminal in West Kowloon, where CK Hutchison manages 12 berths. Li said the proposal is “technically not difficult”, but the most important thing from his company’s viewpoint was that port operations must not be affected.
Stanley Wong Yuen-fai, chairman of the task force, said he was not worried about Li's comments influencing the community or the consultation.
“Anyone can feel free to make any comments, that's the exact purpose of a public consultation,” he said. “The community as a whole will be smart enough to make their own judgment on whether his comments are made for his own benefit,” Wong said.
Analysts said that political considerations were a major challenge for public-private co-development projects, since developers may not want to appear overly enthusiastic as they do not want to give an impression that they are close to the government.
“I believe the public will only give positive feedback if at least 30 per cent of the land is used to develop public housing,” said Raymond Cheng, a property sector analyst at CIMB Securities. “The [government] can figure out the best rate between 30 per cent to 60 per cent.”
He said that co-development is the best way to deliver a fast new land supply, but that the government had a tough balancing act to perform between the interests of developers and the public.