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Macroscope | How the Northern Metropolis land plan can address price and rezoning pitfalls

  • The cost of land must be reduced within a carefully planned framework to be attractive but not hurt the existing market
  • To draw tech game-changers, a business park model would be a good option

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A view of Lok Ma Chau at Hong Kong’s northwest border in May. The Northern Metropolis project aims to turn large parts of the New Territories near Hong Kong’s border with the mainland into a residential and tech hub. Photo: May Tse
Financial Secretary Paul Chan Mo-po recently floated the idea of allocating land directly to large companies willing to settle in the Northern Metropolis. Qualifying companies that hire enough Hongkongers and significantly contribute to the city’s gross domestic product would be expected to level the land and participate in its construction. “This not only helps to improve development efficiency but also does not require too many government resources,” he said.

While on its surface this seems like a good answer to boosting Hong Kong’s attractiveness to big-name players, there are several pitfalls Chan needs to avoid. Chan’s remarks suggest that these companies will be allowed to directly negotiate for the land with the government instead of going through the tendering process.

Hong Kong has several solid draws for multinational companies. While being part of China, it has business laws more compatible with those of the West. Its patent and copyright laws and the cybersecurity required to be a global banking and finance hub should not be underestimated.
Hong Kong has an open financial system with free-flowing capital, allowing businesses to move their money in and out whenever it suits them. Taxes are low, the workforce is highly educated and transport is world-class.

One of the city’s most pressing drawback is the price of land. Hong Kong has some of the most expensive properties in the world. These costs must be reduced within a carefully planned framework to be attractive but not hurt the existing market.

Much of the cost comes from the initial purchase and then seeking rezoning to change the land use restrictions. If the government makes massive concessions for certain businesses, others will not be happy and property prices could be destabilised.

Property prices affect capital expenditure and weigh on payrolls as staff will need higher salaries to be able to afford to rent homes. While it might seem that commuting from Shenzhen is a solution, the cost of living is prohibitive there, too. By the time Hong Kong’s vision comes to fruition, there is likely to be a minimal difference.
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