New World donates almost a fifth of its farmland reserves towards building public homes to ease Hong Kong’s housing woes

New World Development said it would donate nearly a fifth of its farmland reserves to Hong Kong’s government and to non-profit organisations for building public homes, stepping up with a tentative answer to the city’s housing crisis.

The company will hand over 3 million square feet (278,700 square metres) of farmland, equivalent to 27.8 hectares, said New World’s Executive Vice-Chairman Adrian Cheng Chi-kong.

The company, whose property portfolio includes the Rosewood luxury hotel and shopping centres, will donate three pieces of land totalling 28,000 sq ft next to the Tin Shui Wai subway station to Light Be – a non-profit specialist in social housing and tenant development that New World had been working with – for building 100 homes each measuring 300 sq ft, Cheng said.

Construction on the land, which will be released to Light Be for a token sum of HK$1, is expected to be completed by 2022. New World will gift 1 million sq ft in total to Light Be, and is open to donating more land to other non-profit organisations, he said.

“We are very concerned about the housing problem in society,” Cheng said at a press conference after announcing the company’s annual financial results in Hong Kong. “We hope this can relieve the housing problem [where] about 10,000 people can benefit.”

The donation, equivalent to 17.8 per cent of New World’s farmland reserves, could compel the rest of Hong Kong’s landowning families – the Kwoks of Sun Hung Kai Properties, the Lees of Henderson Land Development, and the Lis of CK Asset Holdings – to contribute toward the city’s land supply to alleviate a housing problem that has Chinese state media has blamed for fuelling the biggest public unrest in the city’s history.

Hong Kong’s economy is on track for a technical recession in the fiscal third quarter starting in October, as 16 weeks of street mayhem and protest rallies deterred visitors, crimped retail sales and caused property prices to slide. One in 10 shops now stand empty in the city’s prime shopping district of Causeway Bay, as mainland Chinese shoppers chose to avoid Hong Kong.

“Other developers will be under pressure to help increase the land supply,” said Cushman & Wakefield’s Greater China chief executive Chiu Kam-kuen, adding that Hong Kong’s government needs a comprehensive plan before any addition can be turned meaningfully into liveable homes.

“Will the land be suitable for housing? If these land parcels are located in the green belt, or in areas that are inaccessible by road, they may not provide any immediate help to ease the housing shortage.”

Still, the move is the first tentative step towards a solution, two weeks after China’s state-owned media blamed Hong Kong’s unprecedented civic unrest on the city’s unaffordable housing. Commentaries urged the Hong Kong government to boost housing by seizing land being hoarded by developers with “vested interests”.

The move could also be a boon for Hong Kong’s Chief Executive Carrie Lam Cheng Yuet-ngor, who is expected to deliver her annual policy address by mid-October, her first since the city’s political crisis started.

Lam’s administration has said a proposed vacancy tax will be submitted for vetting by lawmakers in October. It targets developers who hoard completed, but unsold homes – estimated at about 10,000 units – to add to the housing supply to alleviate prices.

“With detailed planning, the government will have an idea of the land that it should acquire for public housing,” said Cushman & Wakefield’s Chiu. “At the same time, the government should speed up building roads, bridges to improve the accessibility to make it suitable for housing development. Otherwise, even if the government gets 1,000 hectares of land for 600,000 homes, they would be useless.”

About 40 per cent of Hong Kong’s new homes over the past decade have been built by the city’s four largest developers, including the Chengs of New World. They are also the city’s biggest land owners and wealthiest families, with vast tracts of farmland in their reserves across the city.

Sun Hung Kai Properties (SHKP), Hong Kong’s biggest developer by capitalisation, owned 30 million sq ft of farmland at the end of 2018, according to an estimate by Bank of America-Merrill Lynch. SHKP officials could not be reached for comment.

Henderson, which owned 45 million sq ft, said in an e-mailed statement that it had previously donated land towards the construction of elderly homes, youth hostels and for housing, and is open to discussing with the government to help to increase the housing supply.

CK Asset, the flagship developer of Hong Kong’s wealthiest man Li Ka-shing, sits on 9 million sq ft. It takes time to turn farmland into homes, CK Asset said in a statement after New World’s donation announcement. “It may take some time for the needy to benefit [from the move],” the developer said, pointing out that Li’s foundation has made HK$25 billion in donations over the years. “We will study the matter.”

New World’s net income rose to HK$18.16 billion in the year ended June, while its underlying profit rose to HK$8.81 billion, missing a Bloomberg estimate by 2.3 per cent. The company’s shares fell 0.2 per cent to HK$10 on the Hong Kong exchange before Cheng announced his land donation.

To avoid accusations of conflicting interests, New World - with 16 million sq ft of land reserves - said its donation will be far from any parcels that it plans to develop for sale.

“None of the donated land will be near our land,” Cheng said. “We don’t want to be misunderstood … of having any conflict of interest. We want to use a new method and thinking to help society. If the government needs to build housing to help the grassroots, we are open for discussion.”

Additional reporting by Sandy Li and Peggy Sito