Real Estate Hegemony
|Real Estate Hegemony|
The Real Estate Hegemony (Chinese: 地產霸權) is a term in Hong Kong refers to the oligarchy of the real estate conglomerates and the government-business collusion. It refers to the phenomenon of the oligarchy in the land development business, which was dominated by the property tycoons, such as the seven major land development companies, the Cheung Kong Holdings owned by Li Ka-shing, Sun Hung Kai Properties owned by the Kwok family, Henderson Land Development Company owned by Lee Shau-kee and the New World Development Company owned by Cheng Yu-tung among others.
The companies had enormous power and influence in the Hong Kong SAR government and its policy making. The real estate companies have also expanded into oligarchic conglomerates of many industry sectors relating to Hong Kong people's daily life, including telecommunications, energy, transport, supermarkets, shopping malls, media, chain restaurants and many others. Due to the government's high land price policy and the Real Estate hegemony, the house price in Hong Kong has also become unaffordable and created social and political tensions as a result.
Hong Kong's reliance on income of land sales began since the establishment of the colony in 1841 where the British intended to make Hong Kong a free trade port. The first Hong Kong Governor Henry Pottinger was partial to British trading firms and looked for their support by deliberately keeping taxes low.
All land in Hong Kong was leased or held by the government as Crown Land. Under Article XIII of the Letters Patent, the Governor had the power to make and execute grants and dispose of Crown Lands in the colony. It became the norm for successive governments to auction off the right to lease property . In the early days, the land was leased for terms of 75, 99 or 999 years. It was subsequently standardised to 75 years in the urban areas of Hong Kong Island and Kowloon, renewable under the old Crown Leases Ordinance, while the land in the New Territories and New Kowloon were normally sold for the residue of 99 years less three days from 1 July 1898.
In the 1980s, the booming property market saw the emergence of the Hong Kong Chinese property tycoons who was later absorbed into the PRC United Front strategy during the transition period. Many of them were appointed various public positions including the Hong Kong Basic Law Drafting Committee and the Hong Kong Basic Law Consultative Committee and later on the preparation committees of the establishment of the Hong Kong Special Administrative Region.
Land supply in Hong Kong was also restricted to 50 hectares (ha) per annum according to the Sino-British Joint Declaration in 1984 which resulted in the shortage of land. The high land price policy which was still in force after the handover consisted of restrictions in land supply which has led to the gross imbalance between supply and demand caused the historic property bubble in the 1990s in which the real estate had become the most profitable industry in Hong Kong and the continuance of the housing affordability crisis.
The five major real estates companies have evolved and expanded into conglomerates by acquiring and forming many companies in various industry sectors in Hong Kong, for example:
- Li Ka-shing's CK Hutchison Holdings: retail (health & beauty specialist Watsons, ParknShop supermarkets, Fortress electrical appliances chain and Watson’s Wine), ports (Hutchison Port Holdings), telecommunications (Hutchison Telecommunications Hong Kong Holdings, 3 Group), energy (Hongkong Electric Company).
- Kwok family's Sun Hung Kai Properties: retail (Yata), telecommunications (SmarTone), transport (Transport International Holdings Limited)
- Lee Shau-kee's Henderson Land Development: retail (Citistore), energy (The Hong Kong and China Gas Company), transportation (Hong Kong Ferry)
- Cheng Yu-tung's New World Development: construction (Hip Hing Construction), retail (Chow Tai Fook Enterprises), transport (NWS Holdings), telecommunications (New World Telecommunications sold in 2016)
- Peter Woo's Wheelock & Co: retail (Citysuper, Lane Crawford, Joyce Boutique), ports and cargo (Modern Terminals Limited and Hong Kong Air Cargo Terminals Limited), transport (Star Ferry), telecommunications (i-Cable Communications sold in 2017, Wharf T&T sold in 2016)
According to the Bloomberg Billionaires Index, the real estate tycoons account for nine of the ten wealthiest people in the city. These real estate tycoons also run their companies as family businesses, for example, Li Ka-shing and his sons Victor Li and Richard Li, Lee Shau-kee and his sons Peter Lee Ka-kit and Martin Lee Ka-shing, Cheng Yu-tung and his son Henry Cheng and Peter Woo and his son Douglas Woo who hold the important positions in their parents' businesses and various public positions.
The land hoarding of the major land developers has also resulted in the shortage of the land. According to a report of Hong Kong Economic Times, there were a total number of 1,279 hectares of land held by the five major land developers in 2010, three times more than the government held. Of the land the land developers owned, 1,000 hectares of it were agricultural land, consisting one-fifth of all agricultural land in Hong Kong. For instance, the four major land developers, Henderson, New World, Sun Kung Kai and Cheung Kong, have bought up massive amount of the farmland in the Northeast New Territories which was awaited to be developed and be bought by the government at a much higher price. The housing projects in the development plan will also highly likely be given to the same land developers.
Out of total numbers of 70 members in the Legislative Council of Hong Kong, 35 seats are traditional functional constituencies of which many of them are indirectly elected by the business sector with the limited electorate of which some of the voters are corporations. The electorate are closely related to the major real estate conglomerates and therefore tend to favour the real estate companies' interest. The functional constituency members, despite elected by a small electorate opposite to their directly elected geographical constituency counterparts, enjoy the veto power due to the dual voting system.
The 1,200-member Election Committee, which is responsible for electing Chief Executive is also dominated by the business sector as one-fourth of the seats are elected by the business sector with the same electorate of the functional constituencies. Another one-fourth of the seats are the political sector where Hong Kong members of the National Committee Chinese People's Political Consultative Conference (CPPCC) are also largely consisted of the real estate tycoons. In the Election Committee elected in 2012 for example, CK Hutchison Holdings held eight seats including Li Ka-shing and his sons Victor Li and Richard Li, Sun Hung Kai held 15 seats including the Kwok brothers, Walter Kwok, Thomas Kwok and Raymond Kwok, Wheelock held ten seats including chairman Peter Woo and Henderson's Lee Shau-kee and his son Peter Lee Ka-kit. Combining other property developers including New World, Great Eagle, Jardine Matheson, Shun Tak and Chinachem and related construction companies, the real estate tycoons were account for 97 seats in the committee.
According to a report by South China Morning Post, the number of seats in the statutory and advisory boards held by directors of the six major property developers rose from 16 in 1998 to 54 in 2010.
A series of controversies after 1997 strengthened the public conception of the government-business collusion with the property tycoons. In 1999, the government sold the Cyberport to the PCCW owned by Richard Li son of Li Ka-shing, Hong Kong's wealthiest man and the owner of the Cheung Kong Holdings, without open Tendering. In 2004, the government sold the Hunghom Peninsula of the Home Ownership Scheme project to New World Development owned by Cheng Yu-tung with a price of HK$800 million, less than half of the original asking price. Leung Chin-man, Permanent Secretary for Housing, Planning and Lands who was in charge of the sales was later named deputy managing director and executive director of New World China Land.
Rafael Hui, Chief Secretary for Administration from 2005 to 2007, the most senior government official, was jailed in 2014 for seven and a half years for accepting HK$19.7 million in bribes and misconduct in public office from Sun Hung Kai Properties joint chairman Thomas Kwok, who was also sentenced for five years, to be their "eyes and ears in government" in a case said to highlight "the cozy relationship between the city's powerful developers and government".
Donald Tsang, Chief Executive from 2005 to 2012, also embroiled in a series of corruption allegations as he was revealed to have received favours and hospitality from real estate tycoons on various occasions, including private jet trip and yacht trips and a treadmill given by Sun Hung Kai. He was later found guilty and sentenced to 20 months in 2017 for two counts of misconduct in public office by failing to disclose plans to rent a luxury penthouse for his retirement from Bill Wong Cho-bau applying for a broadcasting licence.
Since 2012, there has been an influx of the Mainland Chinese capital into the Hong Kong's property market and replacing the traditional Hong Kong real estate conglomerates in various fields as the Beijing government grows its influence in the city's political, economic, and social affairs.
The bidding of the government's land by seven major land development companies, Sun Hung Kai Properties, Cheung Kong Holdings, Henderson Land Development, Nan Fung Group, New World Development, Sino Land and Wheelock & Co, has significantly decreased from the 45 per cent of the total share in 2012 to 22 per cent in 2016, losing to the Mainland land development companies. The proportion of the seven land development companies in the private homes is estimated to drop from 85 per cent in 2014 down to 53 per cent in 2017–19.
The Mainland Chinese companies such as HNA Group and Logan Property Holdings have outbid the local contenders for expensive land in the recent years, account for HK$37 billion worth of the government land sold for residential development in 2017. Chen Feng's HNA outbid 19 contenders with a record HK$8.84 billion in the government land sites in the former Kai Tak airport area.
The high price land policy resulted in the dominance of the real estate industry which is extremely profitable and the decline of other industries. The Hong Kong economy became much less diverse than it was decades ago.
Hong Kong has become one of the most expensive cities in live. Many low-income families has been forced to lived in the sub-divided flats which are unsafe and with poor living conditions, while a lot of middle-class professionals cannot afford buying a flat and find owning a home an impossible dream.
With rapidly increasing rental rates, old shops and restaurants are forced to close down and old neighbourhoods are completely wiped out with the replacement of the chain retail stores and restaurants owned by the real estate conglomerates. The old communities are also torn apart by the new high-rise private flats and shopping malls built by the same real estate conglomerates. For example, Lee Tung Street, nicknamed Wedding Card Street, known for its printing industry and wedding card production, was forced to demolish and redeveloped as a luxury shopping mall and private flats developed by the Sino Land and Hopewell Holdings Limited.
The Real Estate Hegemony also resulted in the increasingly worsening income disparity in Hong Kong and created social and political tensions. The redevelopment of Lee Tung Street sparked a new wave of conservation movement where the conservationists campaigned against the demolishing of the Star Ferry Pier and the Queen's Pier and subsequently the Government Hill redeveloping into business offices. The conservation movement directed its opposition to the government's pro development, putting development ahead of preserving local culture and history, to the perceived government-business collusion and the political inequality in the pro-business tendency of the political system, especially seen in the functional constituencies. The conservation movement also evolved into the localist movement in the late 2000s and early 2010s further increasing the political tensions.
Li Ka-shing, the richest man in Hong Kong who was used to be greatly admired by the Hong Kongers for his hardworking and entrepreneurship, increasingly attracted criticisms for his oligarchic business empire. The 2013 Hong Kong dock strike against the Li Ka-shing-owned Hongkong International Terminals Ltd. became a protest against the Real Estate Hegemony.
The government's Northeast New Territories development plan also received strong opposition as it was perceived as the government-business collusion, as the major land developers including Henderson, New World, Sung Kung Kai and Cheung Kong have already bought in large number of the farmland due to be developed in the plan and most of the 60 per cent private housing projects will be designated to be the low-density luxury flats with some other hectares will be developed into shopping malls where the land developers will benefit from.
- Family business
- Functional constituency
- The Hongs
- Housing in Hong Kong
- Leung Chin-man appointment controversy
- Pro-Beijing camp
- List of Hong Kong people by net worth
- Wang Chau housing controversy
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