Hong Kong's rural hinterland could hold key to chronic land crunch

Hong Kong

HONG KONG'S government says that it needs to build billions of dollars' worth of artificial islands to give the city's glittering skyline room to grow, but critics say that developers are hoarding unused land that could solve the problem.

Hong Kong chief executive Carrie Lam estimated that the 1,111 sq km city needs another 1,200 ha, or about 12 sq km, and has proposed creating new land offshore.

Her plan, which would cost up to US$64 billion, could exhaust half of the financial hub's sizeable financial reserves.

But major developers, including Henderson Land, New World Development and Sun Hung Kai Properties, are sitting on "no less than 1,000 ha" of agricultural land, according to government estimates.

None of the three developers would clarify exactly how much rural land they hold, either directly or through shell companies. Two declined to comment on their plans for it or why they were sitting on the land.

Sun Hung Kai said that it has been working to convert its agricultural land for "appropriate developments to help address the shortage of developable land and housing in Hong Kong", but offered no examples.

Holding onto the land until it is rezoned for private development is potentially lucrative. Property prices have more than doubled in the last decade, and many city centre private flats sell for at least US$25,000 per square foot.

Augustine Ng, a former senior government town planning official for nearly three decades, is sceptical that the city and developers are doing all that they can.

He argued that taking over agricultural land held by developers using a powerful colonial-era ordinance would meet the city's land needs many times over. "In a way, the developers are holding Hong Kong for ransom," he said.

Mr Ng, who recently wrote a detailed proposal on solving Hong Kong's land woes, said that developers conceal their acquisitions through shell companies and middle men, then sit on the land, betting that prices will rise.

"There's no way you can identify who owns the land . . . This is a business secret," he said. "I would not be surprised if they each own 1,000 ha."

Groups including Liber Research, a non-governmental organisation advocating equitable land usage, have investigated hundreds of such shell companies, finding some shareholders to be senior staff of big developers.

The government gave no direct response to a Reuters inquiry on whether it had looked into developers' rural land holdings.

A Task Force on Land Supply, including senior officials, academics and experts, has spent more than a year analysing how to resolve the land crunch but has only a "rough estimate" of such land banks.

"We do have a shortage of land," task force chairman Stanley Wong said. "And this has (been) jeopardising the development of Hong Kong in the past 10 or 15 years."

The task force concluded in a recent report that far more than 1,200 ha were needed. It supported the artificial islands, converting former industrial "brown field" sites in Hong Kong's less-developed northern regions, called the New Territories, and developing part of a golf course that is home to rare trees and wildlife.

Yet it was lukewarm on taking developers' rural holdings, given the risk of protracted legal disputes and protests. Instead, it strongly endorsed teaming up with developers, who would help build public housing in exchange for development rights on rural sites, while the government would provide costly infrastructure like roads.

The proposal has stoked accusations that authorities are ceding power and profits to developers, according to some politicians, land rights groups and experts. The result, they said, would be lower public housing density and more private flats.

Hong Kong provides public housing to more than two million people for an average monthly rent of US$230 per household.

Before Hong Kong returned from British to Chinese rule in 1997, the colonial administration often deployed a powerful "land resumption" ordinance to take property for public use, offering compensation to landowners. In this manner, the city built mini metropolises called "new towns" in the New Territories that have housed millions, many in public flats.

The Development Bureau told Reuters that it planned to take back about 500 ha of private land for a "public purpose" in coming years.

Since 1997, however, new towns have all but stalled amid a freeze on public housing and a scaling back of land supplies - both meant to prop up real estate prices.

Those policies made Hong Kong homes among the world's most expensive. In a city of 7.4 million people, the average wait time for public housing is 5.5 years, and the average living space for households is 430 sq ft. All land in Hong Kong is government owned and leased to buyers.

"The chief executive has not got a policy which takes hold of the land which is, and could be, available," said Leo Goodstadt, a former head of Hong Kong's Central Policy Unit, who last year addressed the issue in a book titled A City Mismanaged. "This is the most serious problem in Hong Kong," he added.

Some land rights activists, villagers and experts said that aggressive rural land acquisition is commonplace.

A businessman surnamed Tang, whose family owns ancestral land in Yuen Long district, said that he has seen many instances of villagers' being hounded to sell land, sometimes by local gangsters.

"The developers don't do the dirty work themselves. In each district, they have people who buy land for them," Mr Tang said, declining to give his full name, that of his village or the developer for fear of reprisal.

"They try to distance themselves from the thugs who could use violence to force people to sell the land," he added.

None of the developers responded to questions about such claims.

Mr Tang said that he was pressured to sell one 10,000-square-foot field for HK$200 (S$34.50) per square foot. It is hard now to find any Hong Kong flats for less than HK$10,000 per square foot.

Chan Wai-ming, a villager in the Shap Pat Heung district, told Reuters that he was forced off a plot now held by Henderson Land.

He said that unknown people scared his family by swearing at them frequently, placing an effigy of a devil outside his house, and scratching his car. Henderson did not respond to repeated requests for comment. REUTERS