Coming soon: Wings El Lavatorio Cheapo

Henderson Land launches the most expensive residential development in Kowloon City, it says here. The apartments on sale range in size from 286 to 433 square feet. Agoraphobics who fear getting lost in such expanses will be relieved to learn that these are the gross sizes, which include bits of communally owned corridors, stairwells and lobbies. The actual living spaces in these units are a far cozier 182 to 282 square feet. The prices are HK$3.95-6.28 million.

The ‘per square foot’ scam, which allowed developers to lie about the size of homes, is finally coming to an end, and Hong Kong must adjust to a new method of pricing flats. Thus, the average price per square foot in this Midget Mansions project would formerly have been advertised as HK$14,079, but is now HK$22,032.

Henderson Land’s boss is 84-year-old Dr the Hon Lee Shau-kee, whose number-one son procured three baby boys from a surrogate mother to ensure the continuation of his virtuous line, and presumably sweep the old man’s grave for decades to come so his ghost is at peace and doesn’t come back to trouble us. Another of Lee’s claims to fame was the infamous apartment on the ‘88th floor’ of a 46-storey tower.

Now, as if the old guy isn’t pushing HK$22,000-psf shoeboxes in Kowloon City, he pops up on the front pages proposing HK$1 million homes on agricultural land he has been sitting on for decades in the New Territories. (He calls them 300-square-foot; maybe, like Germans and Italians of his age who still think in Deutschmarks and Lira, he is thinking gross area – but who knows?) The Standard calls him a ‘feisty billionaire’, while the less charitable might prefer ‘wily old goat’. Either way, it is hard to believe that his suggestion springs solely or primarily from concerns for the well-being of the people of Hong Kong, let alone a specific urge to make homes affordable. (That said, it must be obvious to these tycoons that squeezing more and more local people out of the property market is hardly a sustainable model, and at some stage they would need to focus on sales volume rather than margins.)

Lee is presumably hoping to unlock the value of this old farmland at long last out of self-interest. As a supporter of failed CE candidate Henry Tang, he also probably relishes putting CY Leung in an awkward spot. But that doesn’t mean million-dollar homes are a bad idea. There are unanswered questions. How can the low price be reconciled with current construction costs, recently pushed up by, among other things, former Chief Executive Donald Tsang’s infrastructure mega-projects? What about the cost of roads, sewerage and other civic amenities?

Whatever his motives, Lee is doing everyone a favour by highlighting the glaring contradiction underlying Hong Kong’s interminable housing problem. One the one hand, government wants homes to be affordable; on the other hand, government insists on slapping a huge de-facto sales tax on homes. If (as the academic in the article suggests) purchasers didn’t have to pay the land premium until they sold these cheap homes, the concept is basically a sort of Home Ownership Scheme. In theory, all residential land in the city could be treated this way. Such a system (pay when you sell) would bear a slight resemblance to a capital gains tax on real estate. That’s hardly the most elegant alternative to the high land-price policy, but it’s still a more radical idea than anyone else has come up with lately. Even if it does come from the boss of Henderson Land.

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11 Responses to Coming soon: Wings El Lavatorio Cheapo

  1. Lois Beluga mit Riesenhodensack says:

    I had no idea there was any agricultural land in Hong Kong although I did hear rumours of cows on Lantau and indeed saw a few walking to Discovery Bay, before the curfews, searchlights and escape committees.

    The Government is such a wimp.

    No one owns any land in Hong Kong. It is all leased, with the exception of the Cathedral.

    So let’s call in all those leases of land which has not been used for any purpose but speculation. It’s easy to do. It just needs a man with balls.

    All right. We all know Hong Kong men don’t have ze Hodensack. But some have ze fangs.

  2. Property Developer says:

    Impeccable logic, as usual. But… the government has to act to a minimal extent as a gamekeeper, preventing foolhardy citizens from the danger of negative equity (remember July 1997!). Providing land at much lower short-term cost might have similar effects to allowing 100% mortgages.

    This proposal is basically village houses without the villagers, so on that basis must be an excellent idea. What happens at present is that the rare people brave enough to actually live in a “small house” often manage without drainage, road access, shops/restaurants or SCMP delivery.

    Incidentally, the cost of constructing a 2,000-foot house (3,000-foot in urban developer-speak) is only two or three hundred thousand.

    Why not abolish village houses? That miight be a more elegant solution.

  3. Stephen says:

    Following this obscenely wealthy old tycoon’s nauseating proposal in self-interest will only result in “Cyberport” – sorry Residence Bel-Air – which was the most blatant time a CE acted on a Tycoons proposal “for the good of Hong Kong “. In addition we know the gas company is Henderson as will be the management company to name but two.

    We have thus far seen more out of the box thinking on Property from CY than Donald and Tung put together. However will he go the whole hog and abandon Hong Kong long cherished position of having the most ludicrously priced real estate on earth? Would we accept a GST or higher income tax to make up the shortfall? After all those generous civil service pensions need to be paid for somehow…

  4. Joe Blow says:

    so this is what they call “an endless discussion” ?

  5. anon says:

    Hmmm. Does HK need a policy towards landlords? Does anyone remember something called “land reform” in a nearby place, within living memory…? Those who cannot remember the past are condemned to repeat it, maybe?

  6. Housing Estate Gwailo says:

    Hey Stephen, would we really need GST or other taxes or raise salaries or profit taxes of the land lease revenue was again used to pay for everything, instead of building more stuff we really don’t need?

    Used to be how things worked & back then we managed to do quite well, creating new towns, building public housing & hospitals & schools & all sorts of stuff far more immediately useful to us than the likes of Disneyland or the high-speed death train to somewhere shy of Shitholezhou & pretty much everything built in recent years.

    The beauty of the system as it was originally set up is that cost of land ends up in the cost of all goods & services, so everybody ends up paying this indirect land tax.

  7. Anon says:

    If I had to guess, I’d wager that the HK$1 million homes thing is just a ruse to build public support and get the land rezoned for building. Then once that’s happened, there will be an excuse, no HK$1 mil homes will be built, and the land will instead be used for far more expensive properties.

    You know, a bit like the land in Shatin that was sold (comparitively) cheap for a private hospital, then the developer almost immediately started applying to rezone it for apartments. (Which of course they were eventually allowed to build on almost half of the land.)

    You’d have to be naive to think they had any plan from day one other than to get the land rezoned and make a killing on it. And equally, you’d have to be naive to think a single HK$1 mil home will be built on this land, once building’s permitted.

  8. Hendrick says:

    Anon

    I think your summation is spot on.

    Property tycoons put small proportion of their unfairly gained fortunes back into HK by way of charities or provide a public service, maybe some through a sliver of guilt, but mostly to improve their image, ensure a comfortable afterlife, etc. But certainly not for love of the hoi polloi.

    The hon Lee SK seems to be trying to get one up on CY by launching his idea before the CE’s policy address, endearing himself to a hostile, impatient public and squaring up, as you say, a re-zoning to make a killing. He’s been sitting on this land for a long time waiting for the right time to launch a plan. Present circumstances are ideal.

    Wily old goat indeed.

  9. Joe Blow says:

    Old Lee’s Newyear’s resolution -I read somewhere- was to ‘restore his wealth to 2008 levels’.

    So this is what he had in mind.

  10. PCC says:

    If the HKSAR collected land rents over 30 years (or the full term of the lease) instead of a one-time upfront payment, then maybe more than two companies (CK & SHK) could build 70% of the new residential developments in HK, as is presently the case.

    But the iron triangle of gov’t, banks and developers like the system just fine the way it is. Why not just build 100 sq ft flats and sell them for $333k each? That’s where we’re headed.

    Oops! Please don’t give them any ideas.

  11. Anonyme says:

    Speaking of land rents, why are the New territories still subject to government rent? The lease ran out in 1997.

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