Nowhere to call home? New Territories offers ideal solution to end ‘wasteful use’ of land

For many in Hong Kong, the dream of owning a home continues to grow more distant by the day. Tiny apartments, or what is commonly known in the city as shoe boxes, can cost upwards of HK$4 million.

True, speculators and mainland buyers have been snapping up homes, leading to record prices. Another reason is the scarcity of land, which is viewed as a key driver of prices. But is land scarce in Hong Kong?

Not so, according to a prominent think tank, which says that there is a “large amount of land in the New Territories [that is] reasonably well served by public transport of one kind or another”.

Our Hong Kong Foundation (OHKF) says in a report, titled “From Housing Market Outlook to Land Supply Strategy”, the government should explore and study all possible options, not only prioritise converting brownfield sites into developable land.

Compiled by a research team led by Dr Richard Wong, professor of economics and the Philip Wong Kennedy Wong Professorship in Political Economy at the University of Hong Kong, the report forecasts that the annual average number of new homes completed from 2016 to 2019 will be about 18,000. That represents a 60 per cent increase on the corresponding figure during the past decade.

Berating what he believes is a “wasteful use” of land “through the ad hoc development that takes place under the Small House Policy, Dr Peter Cookson Smith, president of the Hong Kong Institute of Urban Design, says: “We should have a regeneration, greening and pedestrian connectivity agenda for the city to actually improve what is now a very poor overall environment.

“We actually have a large amount of land in the New Territories, much of it reasonably well served by public transport of one kind or another.”

Beginning in 1972, the Small House Policy’s goal was to improve the poor standard of housing in the New Territories. The policy gives indigenous male villagers, who are 18 years old and descended through the male line of a resident since 1898 of a recognised village in the New Territories, the right to a land grant during his lifetime to build a house.

This has stirred plenty of debate, but Cookson Smith says “this is, as it always has been, a hot potato”.

In order to meet its target to supply more than 40,000 units each year, the government has delivered on its pledge to release more land for sale over the past two years.

As a result of government land sales, the MTR Corp, the Urban Renewal Authority (URA) and the Hong Kong Housing Society (HKHS) have contributed an annual average of more than 14 million sq ft of gross floor area in 2014 and 2015. That was up 75 per cent on the annual average of the preceding three years, according to the report.

However, Wong’s report says “there is an immense and substantial demand for housing yet to be met”. On where to find more land for housing, the think tank suggests that the government should look at multiple sources, including reclamation, and making a better use of brownfield sites.

However, Cookson Smith sees no reason to develop on brownfield sites in urban areas as these are densely populated with an average of 2,000 people per hectare.

There is also the issue of the large tracts of farmland owned by large developers. Henderson Land Development held about 45 million sq ft of land at the end of 2015, while Sun Hung Kai Properties owned over 30 million sq ft of sites across the New Territories, according to their annual reports.

“We need to come up with an acceptable formula of putting this land to good use through land exchange so that sufficiently large packages can be properly planned,” Cookson Smith says.

In 2014, the government introduced a pilot scheme to test run an arbitration on land premium as a way to expedite land supply. Comprising independent valuers, the arbitration seeks to help with agreements between the government and private land owners on premiums payable for lease modification/land exchange applications.

The government is going to review the effectiveness and implementation of the pilot scheme after it expires later this year. Of the 11 lease modification/land exchange cases submitted to the arbitration panel by the end of 2015, one applicant accepted the arbitration option, according to the Lands Department.

As for reclamation, the government has identified five areas that are suitable, including Lung Kwu Tan, Siu Ho Wan, Sunny Bay, Ma Liu Shui and southwest Tsing Yi. These would appear to offer good potential for new residential development with no real objections from affected parties, Cookson Smith says.

The OHKF report also points out that competition for land has intensified since the abolishment of the “Application List System” and the re-introduction of government-initiated land sales. The proportion of gross floor area sold to the three biggest developers has dropped to about 50 per cent in 2015 from around 70 to 90 per cent in preceding years.

Recent land sales have seen the participation of more joint ventures and consortiums formed by smaller local developers and mainland developers, in addition to industry heavyweights.

Tendering allows all bidders to make an offer purely based on their own financial and risk analysis, free from the pressure of competitive auction bidding, says Jimmy Fong, managing director of sales and marketing at CSI Properties. “This land sale method helps level the playing field for smaller players, including us.”

But he notes that some sites recently listed for sale are actually not mature enough for development, including those lying within “green-belt” zones that are the subject of judicial reviews from environmental concern groups.