Property group urges Hong Kong government to issue land bonds to speed up rural development and ease housing crisis
- The Hong Kong Real Property Federation will meet the government to put forward its suggestion ahead of Carrie Lam’s policy address on October 16
- Proposal comes as the government struggles to resolve deep-rooted social problems, including a chronic shortage of land generally blamed for inflating property prices and fuelling protests
The government is being urged to issue “land bonds” to private land owners and increase building density in the New Territories to speed up rural development and ease the city’s housing crisis.
The Hong Kong Real Property Federation said it would meet the government in the coming days to put forward its suggestion for inclusion in the policy address of the city’s embattled leader, Carrie Lam Cheng Yuet-ngor, on October 16.
The proposal comes as the government struggles to resolve deep-rooted social problems, including a chronic shortage of land generally blamed for inflating property prices. Hong Kong’s sky-high house prices, which put home-ownership beyond the reach of most locals, are one of the grievances seen as fuelling angry protests that have ravaged the city for the last four months.
The federation’s idea is for the government to “commandeer” private land plots fit for housing development and to pay their owners with tradeable land bonds. These bonds entitle their holders to redeem land.
“Society has a consensus that the land problem can wait no longer,” said John Yip, representative of the professional committee at the federation, a group of developers, construction contractors, surveyors, architects and planners.
The creation of a market for land bonds would generate liquidity, said Yip.
“Professional surveyors can judge [how much is paid in bonds for each unit of land],” he said. “For instance, if a developer wants to develop in the New Territories, it can buy land bonds in the market. In the future, if the government offers some land in the New Territories, it can use the land bond as part of the value for bidding.”
From the 1960s until 1983, the government issued certificates of entitlement, commonly known as Letter B certificates, to village landlords in the New Territories when it wished to acquire land for rural redevelopment. They were promised a future land grant at a fixed exchange ratio of 5 square feet of rural land to 2 square feet of residential land in the New Territories.
The Hong Kong Real Property Federation was established in 1991, and has 300 members including Chevalier International Holdings, KPMG and Billion Development & Project Management.
It is also recommending a relaxation of the plot ratio – the amount of gross floor area a project can yield in proportion to its site area – for land in the New Territories to a standard 10 times when the plot is designated for housing development. Plots have been known to have a ratio below 1-to-1.
Chinese state-owned media recently 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”.
Andrew Wan, legislator and vice-chairman of the housing panel in the Legislative Council, said that while the proposed bonds could make land resumption “faster”, he had reservations about the compensation arrangements.
“[The arrangement] has to reflect the true value. Can 5kg of copper be compared with 2kg of gold? Is there any restriction on the location of the residential land exchanged? Or is it citywide, including areas for redevelopment? There is a big difference,” said Wan.
The terms would need to be considered “fair and transparent” to avoid “the suspicion of collusion,” he added.
The proposal could lead to land speculation and make resumption even more complicated, said Chan Kim-ching, founder of Liber Research Community, an NGO focusing on land policies.
Chan said the bond would allow developers to benefit from hoarding land for decades, effectively enabling them to control even more land after buying the bonds from market.
“Why would you create a new system to let developers play with? We think this is not the policy most needed today,” he said.
Addressing these concerns, Yip said compensation of land bonds could be arranged in the same way as what is done currently with land resumption. There would be no discussions in private, so there would not be collusion.
Yip added that the price of a land bond in the proposal could be at the mercy of market sentiment and there remained a risk with the trade.