Villagers home in on profits

HONG KONG: Soaring property prices have made rural land sites increasingly expensive — and highly sought-after — as indigenous villagers and developers hold on to land or snap up additional sites so they can make big profits by building village houses, property agents say.

Land prices in villages in the New Territories have risen from between HK$50 and HK$150 (RM16.51 and RM58.53) per square foot in 2005 to a current average range of between HK$200 and HK$300 per square foot, Dan Li Chiu-sang, project manager at Oriental Property Agency, said.

Limited undeveloped sites and better transport have lured a growing number of city dwellers to rent or buy village homes in recent years — adding to pressure on prices.

Oscar Man, 30, was among those tempted to live in the country, but his dream of being a homeowner ended in disappointment. He had agreed with a village friend to spend HK$3 million to build a three-storey house on his friend's land in Yuen Long — only for his friend to abruptly turn down the plan.

"Originally the plan was that I would pay all the construction and renovation fees for building a three-storey house on my friend's land," Man, who is neither a landlord nor a descendant of indigenous villagers, said. "By offering the site my friend would not need to pay a penny, but agreed to take the ground floor of the house, while I would occupy the top two storeys."

Under the small-house policy,  introduced in 1972, male descendants of indigenous people in the New Territories aged 18 or above have the right to build a three-storey house with a footprint of 700square feet in their own village. They can either apply for a licence to build a house on their own land, or obtain a private treaty grant of government land at a concessionary premium.

The rights to develop are tradeable, which means they can be sold. Houses built under the policy can also be sold to non-villagers, but vendors may need to pay a premium to the government depending on the type of site.

Since the family of Man's indigenous villager friend has both the land and right to build a house, Man was hoping this plan could help both of them to become homeowners. "It would have cost me nearly HK$3 million for a two-storey house of 1,400 square feet in total, a good bargain compared with a tiny 600square foot, two-bedroom unit in the city centre," he said.

Yet Man's hopes were dashed when his friend's brother suddenly expressed a wish to migrate back to Hong Kong in the future, meaning he would also need a home on the site. Man has had to scrap the plan because it is difficult to find another eligible indigenous villager and site for development.

Property agents specialising in land and property trading in the New Territories said demand for sites on which villagers are eligible to build a small house under the policy had been strong, as reflected by the soaring prices.

Li's company handled about a dozen transactions involving sites for small houses last year — up from four to five transactions in 2005. "Since property prices in city centres have gone up so much, indigenous villagers want to develop the sites themselves because of higher profit," he said.

Li said village house prices have risen on average by 60% in four years. The cost of a two-storey apartment in Kam Tin, Yuen Long, is now more than HK$6 million, nearly double the price of HK$3 million or so five years ago.

"An eligible villager may pay only HK$5 million to HK$6 million to buy a site and build a three-storey house, but the house can sell for up to HK$10 million or even HK$30 million in the case of some luxury ones," said a supervisor at Ka Hing Properties, who specialises in village houses in Sai Kung and gave her name as Jim Jim.

Land sites big enough for 700 sq ft homes in Yuen Long now cost about HK$1 million, she said. Sites in Sai Kung or Clearwater Bay were more expensive at HK$3 million to HK$4 million and prices had risen by about 20% in two years.

Jim said there was insufficient land for all eligible indigenous villagers to build homes. Some villagers applied to buy a site for construction in another village after gaining the approval of the heads of both villages and government, and also receiving no local objections. But some villages did not accept outsiders, she said.

Other villagers might sell their rights to build to developers, at prices ranging from about HK$300,000 to HK$1 million, she said.

"Purchasing rights from people in Nam Shan village, Sai Kung, is very expensive because many villagers are still children and the village doesn't accept other indigenous villagers exercising their rights in their village," Jim said.

Frankie Leung Yu-hang, a descendant of an indigenous family living in Wang Chau village, in Yuen Long, did not consider using his right to build a three-storey house because he had no plot of land; he is one of many villagers that has not used his right.

Instead, he bought a new village house from a developer for about HK$6 million more than a year ago. "The cheapest way — as little as HK$2 million or so — would be to buy a site and build a house myself," he said.

Since the small-house policy involves many restrictions and rules, property agents warn people about the risks of buying and selling development rights and lands for building village houses.

"Buyers should be careful if the sites are on green belts, which may have development restrictions," Li said. People should also check to see if a villager has ever used his development right, or sold it to others before buying it from him.

There are sales restrictions on houses built under the small-house policy; those built on private land may not be resold within five years unless the owner pays a premium to the Lands Department.

Development Bureau statistics show that between the policy's introduction in 1972 and the end of October last year, 35,559 small houses were built. The Lands Department forecasts that about 1,200 applications by indigenous villagers to build small houses will be approved each year. — SCMP