Property prices have once again scaled new heights (despite the heavy punitive stamp duties), demonstrating conclusively that regulatory constraints do not work. Demand management is futile in the face of a massive shortage of housing units. The scale of the shortage can be surmised by the gap in cumulative family formation numbers and new housing units completed over the past 30 years.

The cumulative number of marriages in Hong Kong from 1986-2016 was 1,745,000. Over the same period, the cumulative number of new domestic housing units built was 1,572,000. Assuming demolished units amounted to about 10 per cent of the new supply, then the net increase was only 1,414,000 units.

The unmet cumulative housing demand in terms of the number of units over the past three decades is enormous. The mushrooming of sub-divided units in the private sector is a natural outcome of the shortage. Factors like quantitative easing, low interest rates, Mainland buying, and runaway speculation are relevant, but these are not the most important drivers of housing shortage in Hong Kong.

Clearing the backlog of cumulative shortages and meeting the continuing demand for housing units will be a major policy priority for the incoming Chief Executive. It will require a fresh understanding of the ‘complex causes’ of these persistent shortages that have appeared over the past three decades.

This is too difficult and complex a problem to blame it on a single factor: Donald Tsang for failing to provide more land and housing units, or greedy property developers for withholding land and housing supply, or government policy to maximize land revenues, or crony capitalism and plutocracy.

The main reason for our land and housing shortages has been our failure to grasp the full impact of China’s opening and global economic integration on Hong Kong: it has created enormous prosperity that has fuelled the demand for housing. As property prices escalated, it also created a huge disparity in propertied wealth between the ‘haves’ and ‘have-nots’ to foment a huge political divide and dissent. And one must remember that the ‘have-nots’ still demand housing even though they can ill afford it. Our failure to anticipate the growth in demand has blinded us to the need to increase our land supply aggressively.

Increasing Land Supply

Between 1945 and 1995, real property prices in the US did not increase despite rising prosperity. Increases in housing demand were met by increasing housing supply by building more units and larger units (or suburbanization) so that real prices remained steady. Prices then began to rise rapidly in the late 1990s and eventually began to correct and collapse a decade later.

Why did US property prices rise in the late 1990s when they had been stable for so long? Harvard economist Edward Glaeser provided the only convincing answer to this puzzle. Global economic integration that began in the 1980s created unprecedented economic prosperity. The government also relaxed rules for mortgaged lending. This encouraged homeownership and a robust growth in the demand for housing. Restrictive planning and building regulations, however, held back development so housing supply failed to respond to rising demand. As a result, property prices began to surge in the late 1990s.

Glaeser found property prices increased more in cities where regulatory restrictions were worse, like Boston, New York, and San Francisco. Regulatory demands increased and became more complex, resulting in development delays. Regulations also created opportunities for more interest groups to delay development by lobbying against a particular development proposal.

In Hong Kong, regulatory restrictions are also an important cause of land supply and development delays. Consider the three most important sources of land supply: (1) land reclamation, (2) urban renewal, and (3) conversion of New Territories land – both green and brown sites.

The first two sources of land supply have been unimportant for quite some time. Land reclamation has essentially slowed to a snail’s pace as has urban renewal because redevelopment of built-up urban areas is a very difficult process. Increasingly new land has to be found from the conversion of New Territories land. But for a number of reasons this process has also become very protracted.

The basic principle used by the government is to charge premiums of 100% of the increase in value for conversion of New Territories land. The premium is calculated as the difference between the government’s assessed ‘after’ and ‘before’ values. This is a correct approach, but disagreements between the developer and the government over the assessed values can delay development sometimes for very long periods of time.

Disagreements may arise in the assessment of the ‘before’ value. Land in the New Territories was no longer restricted to farming uses after the court ruling on the Melhado Case (1983). The value of land in the New Territories became higher than its pure agricultural value. These uses must not require any building structures, but can include such things as open storage, storage of container boxes, vehicle parking and the like—for convenience these can be called Melhado uses. Disagreements may arise because the value of Melhado uses of the land can vary with location and over time.

The ‘before’ value of land has increased enormously over time. Containerization of shipping and China’s opening created a huge demand for storage space. The recently Shenzhen-listed S. F. Express worth US$25 billion was an early beneficiary of permitted Melhado uses of land in the New Territories. The logistics industry in Hong Kong would have suffered enormously without these sites (known as brown field sites).

The government calculates the ‘before’ value assuming it is cleared land, which is not always the case. There may be buildings and structures existing on the land that command an economic value and will incur a cost to demolish. Government ignores these factors. The resulting estimated premium may therefore be inflated and not acceptable to the developers.

Another source of disagreement is the assessment of the ‘after’ value. The government often fails to take into account the development costs incurred in demolishing and rebuilding an existing facility. For example, a pre-existing transport exchange that has to be demolished and rebuilt later is omitted in the calculation of the premium. The result again is to produce inflated values.

Some years ago HKU had to bear the huge full cost of relocating an existing 47-year-old water tank servicing the Kennedy Town area in preparation for a new campus. Government rules necessitated HKU pay the demolishing and rebuilding costs of this replacement public utility, so the public received a brand new replacement water tank free of charge. Developers are unlikely to be so accommodating.

When disagreement over the premium occurs, developers will  wait for market conditions to change in their favor because when government expects the market to soften in the future, a lower premium is demanded. The problem is that for three decades the property market has not adjusted downwards (except during the Asian financial crisis), making it less likely for developers to accept what the government is prepared to offer.

Development has thus been delayed for decades as a result of government intransigence in refusing to set proper premiums. By the late 1980s, the relative gap between the prices of private residential units and the bidding prices for building construction was widening. This reflected in part the higher transactions cost of coming to an agreement on land premiums. The gap has persisted up to the present time and even through the Asian financial crisis (see Figure 1).

Figure 1: HK Private Property Price Index and Building Works Tender Price Index, 1980- 2016

Source: Ratings and Valuation Department and Rider Levett Bucknall 

Clearly there is room for government to set premiums that are more reflective of true values and costs. Failure to do so will continue to delay development at a time when land conversion provides the most promising avenue for increasing new land supply.

Some believe that government should resume land and threaten to slap a punitive tax on the leaseholders if they fail to develop it within a specified time. Governments in some countries have used eminent domain to force development, but their experiences show it is far from evident that that this provides either a cheaper or faster solution for recovering land.

The transactions cost of assembling and clearing land for conversion cannot be eliminated by administrative fiat. Such an approach also has the downside of damaging the integrity and security of private property rights with negative impacts on long-term property values and the rule of law, and obviously is politically divisive.

A more effective and efficient example from other countries has been to task developers with the provisioning of both public and private housing developments. But the key to success has always depended on setting the correct premium or making appropriate provision for development gain.

In the long term, government cannot rely solely upon land conversion in the New Territories to meet housing demand (as well as other development uses of land). It will have little choice but to reinstitute a program of land reclamation as soon as possible. In Hong Kong only 6% of our land has been reclaimed, while 20% of the land in Singapore has been reclaimed. We are definitely behind the curve and the sooner we lay down plans for land reclamation, the better off we will be in shaping long-term expectations.

Next week I will look at the pressures on housing from population changes and how addressing the housing problem will be imperative to the government’s future financial health and reduce the divide in society.

Chinese Version :

未来五年土地与房屋政策之我见（上）
王于渐教授 SBS JP

纵使早前增加惩罚性印花税税率，房屋价格却依然再创新高，足证以规管措施为楼市降温根本无济於事。面对房屋单位严重短缺，需求管理措施只徒具形式，要窥探住屋短缺程度，可根据新家庭累计数字与近30年来新落成单位的差距，加以推断。

1986至2016年期间，香港累计婚姻达1,745,000宗，建成住宅单位总共1,572,000个。假设拆卸单位占新供应一成左右，则净增长单位仅得1,414,000个。

近30年来，按落成单位数字计算，房屋供不应求的程度实在严重，楼价飙升、私楼劏房激增都是必然结果。至於量化宽松、低息环境、内地买家、炒卖成风等，均属影响因素，但并非导致动香港房屋短缺的主因。

如何清理积压的供应短缺情况，满足对住宅的持续需求，乃是候任特首政策上当务之急，必需换个新角度，全盘了解近30年来房屋供应持续短缺的「复杂成因」。

这棘手复杂的问题背后实在有太多的原因，不能只归咎於任何单一因素：前任特首曾荫权未能增加土地和房屋供应；地产发展商贪得无厌，囤积土地；政府奉行高地价政策；以至裙带资本主义甚或金权政治等。

本地土地与房屋所以持续短缺，主因在於当局未能掌握中国对外开放与全球经济融合对香港影响之深，社会繁荣昌盛，大大推动房屋需求，楼价随之飙升；形成「有产阶级」与「无产一族」之间在物业财富上的巨大差距。纵使「无产一族」缺乏经济能力，但对住屋亦有需求，当局昧於需求升势，自然忽视大幅增加土地供应的逼切性。

增加土地供应

1945至1995年，美国虽历经半世纪繁荣，但房地产未见升值，房屋需求增长的同时，透过增建房屋及较大单位（或由市区迁至郊区）方式满足需求，实质楼价一直维持稳定；1990年代末楼价开始飙升，及后渐见调整，十年后终告大跌。

美国楼价曾经长期处於稳定状态，为何在1990年代末趋升？哈佛学者Edward Glaeser的解说实堪足信。始於1980年代的全球经济融合，造就前所未见的经济繁荣，加上美国政府放宽按揭贷款规例，在增强置业意欲的同时，亦使房屋需求增加；规划与建筑规管措施却拖慢发展步伐，房屋供应量追不上需求升势，楼价遂於1990年代末急速上扬。

Glaeser发现，在规管特别严格的城市，例如波士顿、纽约、三藩市，楼价升幅尤其厉害。规管要求日增及繁复化延误发展；规管成风更令各种利益团体有机可乘，针对个别发展计划进行游说，以期拖慢发展进度。

香港的情况亦类同，规管限制也是延误土地供应与发展的一大因素。本港主要土地供应来源有三：一）填海；二）市区重建；三）改变新界绿化地和棕地用途。

填海与市区重建其实早已变得次要，前者步伐慢似蜗牛，后者则因市区高度发展而举步维艰。要另觅新土地，唯有改变新界土地用途，但这方面的进展亦障碍重重。

有关厘定改变新界土地用途补价方面，政府的基本准则是徵收升值的100% 作为补价，而升值是根据政府评估「发展后」价值与评估「发展前」价值的差别。虽然做法正确，发展商与政府在评估价值方面却屡有分岐，是以不乏发展严重延误的情况。

分歧每在评估「发展前」价值上出现。自从法庭就1983年「生发案」(Melhado Case)作出裁决之后，新界土地不再限作农地用途，地价因而高於纯作农地的价值。此等用途不可包含任何建筑物，但可用作例如露天存放场、货柜存放场、停车场等，为简便起见不妨一律统称为「生发」用途。由於土地的「生发」用途因地点或时间而异，难免在评估上出现分歧。

随着时日变迁，土地「发展前」价值大幅上升。航运货柜化以及中国对外开放，令货柜存放场需求激增，近期在深圳上市，市值达250亿美元的顺丰速运，率先受惠於新界土地用作「生发」用途的机遇。若没有此等用地（所谓「棕地」），香港的物流业当严重受损。

应课补价另一分歧之处，在於评估「发展前」价值。政府计算评估「发展前」价值时，往往假定有关土地已清理妥当，实际上却非必然如此。土地上或已有具经济价值的建筑或结构，牵涉拆卸的额外代价，政府对此视若无睹，补价估值过高，难令发展商接受。

另一分歧则在评估「发展后」价值方面。政府往往不将拆卸和重建现有设施方面涉及的发展成本考虑在内，例如忽略原有运输交汇处卸拆与重建所需成本即属一例，同样令补价估值过高。

若干年前，香港大学筹备兴建新校舍时，须按政府规定，一力承担迁移有47年历史的坚尼地城配水库，以及重建配水库的所有巨额费用，该区居民免费得享全新公共设施，若换了是私人发展商，当不会如此大方。

一旦应课补价出现分歧，发展商会静候对他们有利的市场环境，因为当政府预期市场将回软，便会降低应课补价，问题是物业市道近30年来一直未见下调（唯有亚洲金融风暴期间例外），发展商自然不接受政府开出的补价。

近数十年来，政府一直未能妥善厘定补价，土地发展备受延误。及至1980年代末，私人住宅单位售价与建筑工程投标价格差距日益扩大，部份原因在於补地价达成协议的交易成本上升，差距持续至今，甚至在亚洲金融危机之际亦未见收窄（【图1】）。

图1：1980- 2016年香港私人住宅物业价格指数与建筑工程投标价格指数

数据来源: 差饷物业估价署及利比

显然政府在厘定应课补价时，应贴近实际地价与成本计算。今时今日，改变土地用途为增辟土地的主要途径，政府若不急谋对策，从速改善，只会继续延误发展。

部份论者认为政府应收回土地，若地契持有人未能於特定时间内发展土地，则惩以重税。部份国家以徵用方式强制发展，然而它们的经验未能证明可减低收回土地成本，或加快发展步伐，政府其实透过强行以行政手段回收土地，亦无法令收集与清理土地的交易成本消失，此举更会破坏私有产权完整性及保障性之虞，甚至削弱物业的长远价值，亦会造成政治分化。

观乎外国行之有效的办法，在於容许发展商同时兴建公、私营房屋；不过，成效关键始终在於正确厘定补价水平，并在发展利益方面加入适当条款。

长远而言，政府难望单靠改变新界土地用途，以满足对房屋或其他土地发展用途的需求。当局迟早要恢复填海，目前全港用地中有6% 源自填海，反观新加坡的填海比例则高达20%。在这方面，香港未免落后形势，今后应从速厘定填海大计，方可有望切合长远需要。

下星期我将解构人口变化对房屋造成的压力，以及政府必需如何首先解决房屋问题，才可维持健全财政和改善社会分化情况。

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