The Hong Kong government is likely to face legal challenges over its plan to buy back farmland from local property development groups, which reportedly own more than 1,000 hectares in the New Territories.

Stanley Wong Yuen-fai. Photo: RTHK

If the government wants to resume all the farmland owned by property giants under the Lands Resumption Ordinance, it will probably face judiciary reviews, Stanley Wong Yuen-fai, a former chairman of Task Force on Land Supply and current chairman of Subsidised Housing Committee of Housing Authority, said in radio program on Saturday.

However, if the government wins these legal cases, it could boost its land reserve more easily in the long run, Wong said.

Wong also suggested that the government to increase the compensation rates it will pay for resumed land in order to accelerate the land buy-back process.

According to the Lands Department, ex-gratia compensation rates for resumed land is HK$1,124 (US$143.70) per square foot for ordinary agricultural land and HK$1,348.80 per square foot for farmland in the New Territories (zone A), or within the New Town boundaries.

Hong Kong’s Democratic Party had urged the government for years to buy agricultural land from the property developers under the Lands Resumption Ordinance. But the government rejected the idea, saying such a move would trigger judicial reviews that could take years.

However, Michael Wong Wai-lun, Secretary for Development, told the Legislative Council in May 2018 that the government had only faced eight cases of judicial review out of 154 projects in which land was bought over the past 20 years. He said the government won all these cases and the longest case didn’t last for more than a year.

The government has begun to reconsider the idea of buying back this land after the Democratic Alliance for the Betterment and Progress of Hong Kong, a pro-Beijing political party, urged it to do this on September 11.

Property giants blamed

The following day, the People’s Daily and Xinhua News Agency, published commentaries that blamed Hong Kong property developers for hoarding land and pushing up home prices over the past decade. They said high property prices were a root cause of the social unrest that has plagued the city in recent months.

However, the Real Estate Developers Association of Hong Kong said in a statement on September 13 the claim of land-hoarding was a “misunderstanding”. Property developers said they had hoped the government would increase the supply of land and housing – and they could not build houses on farmland before going through official procedures which usually take 10 to 20 years to complete. They said they would work with the government to speed up the process.

Democratic Party MP Andrew Wan Siu-kin. Photo: RTHK

Democratic Party lawmaker Andrew Wan Siu-kin told Hong Kong media that Beijing and the DAB wanted to shift the blame for Hong Kong’s social unrest onto property developers.

Ivan Choy Chi-keung, a senior lecturer at the Chinese University Hong Kong, said high property prices definitely were a deep-rooted problem in Hong Kong. But Beijing may have made a wrong conclusion about protests over the extradition bill, as young people were more worried about an erosion of their freedoms, not housing problems, Choy said.

KK Tse, a former management consultant who became involved with the Hong Kong Social Entrepreneurship Forum, has said Hong Kong has one of the highest Gini coefficients – a measure of inequality – in the world.

“The number of poor households reached 530,000, with more than 1.3 million people living in poverty [over 15% of the population],” he told the South China Morning Post. “Property prices have soared to a level that is totally out of reach for most people, especially the younger generation. In a city in which seven of the 10 richest people are in the real estate business, financial assets are the major source of income polarisation.”

Vast price gap with Singapore

In fact, home prices have shot up dramatically in Hong Kong – by 483% since July 2003, because of the city government’s policy of not intervening in the housing market.

This can be seen in the Cents-City Leading Index, compiled by the Centaline Property Agency to reflect secondary private home prices. The index fell to 31.7 in July 2003 from 100 in July 1997 after Hong Kong was handed over from the British to the Chinese government. But it has risen dramatically over the past 16 years, with the index at 184.96 on Friday.

But in Singapore, home prices have only increased by about 88% since 2004, according to a property price index compiled by Tradingeconomics.com. The difference in the mix of public and private housing has caused the vast difference in property prices in the two Asian hubs.

Housing and Development Board apartments in Singapore. Photo: Wikimedia Commons, ProjectManhattan

About 80% of the 5.87 million people in Singapore live in 1.2 million government-built housing units. These citizens can buy Housing and Development Board flats at an affordable price.

Hong Kong also has about 1.2 million public housing units but these account for only 45% of all units, according to a Legco document. About 2.1 million people live in these units while most of the city’s 7.4 million people live in private apartments, which have prices very sensitive to the influx of ‘hot money’.

10-year housing target

The Housing Authority said there were about 147,900 general applications for public rental housing at end-June 2019. There were another 108,200 non-elderly one-person applications under the Quota and Points System. The average waiting time for general applicants was 5.4 years and 2.9 years for single elderly applicants.

The government estimates that over the next decade there will be 450,000 new homes in the city, 315,000 or 70% of which will be public housing units. But it said Hong Kong lacks the land needed to build 67,000 public housing units.

Agricultural land in the New Territories. Photo: RTHK

According to a report by the Task Force on Land Supply, about 150 out of 1,000 hectares owned by property developers can be resumed for development within a decade.

Between 34,000 to 107,000 apartments can be built on 150 hectares of land – equivalent to about eight Victoria Parks in Causeway Bay, depending on different plot ratios, HK01 reported on Friday. It cited a plot ratio of 0.86 in Sha Tau Kok Chuen and as high as 6 in Wang Chau in the New Territories.

The government will probably be able to build 70,000 flats on the 150 hectares of land, which would meet its 10-year target, it said.

ReadHong Kong property tycoons in Beijing’s crosshairs

ReadHK property prices down 3-5% on protests, trade war