Victoria Harbour separates Hong Kong Island from the Kowloon Pensinsula, which borders mainland China
Area of satellite image
Shenzhen
Hong Kong
Why Hong Kong’s Property Tycoons Are Beijing’s Scapegoats
After six months of unrest in Hong Kong, China’s main scapegoat has been four local property dynasties who control firms with assets worth more than the special administrative region’s gross domestic product.
Communist Party-controlled media outlets have repeatedly called Hong Kong’s housing crisis the “root cause” of the protests, and pressured the government to seize idle land from property developers to build affordable housing. Carrie Lam, the city’s leader, announced measures in October to step up compulsory land purchases without specifying any locations.
An average flat in Hong Kong is 484 square feet—the smallest in the world and about half the average in New York or London. About a million families are in public housing, and another quarter million applicants are on waiting lists, accounting for roughly half of all households in one of the world’s most expensive cities.
Still, most who have joined the protests see Hong Kong’s housing woes as simply a symptom of the wider problem fueling the unrest: A lack of democracy. The demonstrations against China’s increased grip on the city have drawn support from a wide swathe of Hong Kong society, from office workers in the financial district to wage earners in poorer areas.
Even so, the spotlight is now on the four clans that have amassed empires, giving them fortunes worth more than $100 billion (HK$780 billion). The Kwok, Li, Lee and Cheng families control four of the city’s biggest property developers—“the Big Four”—and developed some of the most expensive buildings in the main business areas of Central and Tsim Sha Tsui, along Victoria Harbour.
CENTRAL
SAI YING PUN
WAN CHAI
CAUSEWAY BAY
TSIM SHA TSUI
Victoria Harbour
N
Central Plaza
Paid HK$3.35 billion for the site
in 1989, a record at the time
in 1989, a record at the time
The Leighton Hill
3-bedroom unit sold for
HK$47.8 million in Nov. 2019
HK$47.8 million in Nov. 2019
Harbour Centre
Sun Hung
Kai Centre
Kai Centre
World Trade
Centre
Centre
International Finance
Centre (IFC) & Four Seasons
Centre (IFC) & Four Seasons
Co-developed with Henderson
Land Development and Towngas
Land Development and Towngas
International Commerce
Centre (ICC)
Centre (ICC)
Co-developed with
MTR Corporation
MTR Corporation
West Kowloon Site
Paid HK$42.2 billion
in November 2019
in November 2019
The Cullinan
The Signature
Pearl City
Dragon Pride
Hong Kong Convention
and Exhibition Centre
and Exhibition Centre
3 floors of Convention Plaza sold
for HK$1.8 billion in April 2019
for HK$1.8 billion in April 2019
Methodist House
New World Tower
Manning House
Victoria Dockside
The Masterpiece
& K11 Art Mall
& K11 Art Mall
Queen’s Terrace
Diva
Elizabeth House
Sold for HK$1.34 billion
in 2004
in 2004
The Elegance
at Sheraton
at Sheraton
The Kowloon Hotel
Shopping Arcade
Shopping Arcade
Silvercord
No.1 Star Street
Admiralty Centre
United Centre
23rd floor sold for HK$58 million in 2009
Cheung Kong
Center
Center
Kennedy Park
The Center
Sold in 2017
MyCentral
Robinson Heights
Princeton Tower
Mira Moon Hotel
The Pinnacle
International Finance
Centre (IFC) & Four Seasons
Centre (IFC) & Four Seasons
41% stake in the two towers
and Four Seasons Place
and Four Seasons Place
Car park site
Paid HK$23.3 billion
in 2017 with plans to
build a high-rise
in 2017 with plans to
build a high-rise
Eva Court
Park Rise
18 On Lan
H Code
H
Queens
Queens
Golden Centre
Sold by Henderson
for HK$4.4 billion in 2016
for HK$4.4 billion in 2016
FWD Financial Centre
Fetched HK$7.2 billion
bid in Oct 2018
bid in Oct 2018
The Big Four have developed many of the gleaming towers that make up Hong Kong’s skyline. Taken together, their properties are some of Hong Kong’s most iconic and frequented spots. It would be difficult to spend time in the city without setting foot in one of their buildings.
The Kwoks
Sun Hung Kai Properties
Founded in 1963
Hong Kong’s richest family owns Sun Hung Kai Properties, which is chaired by Raymond Kwok. The company co-developed the two tallest buildings in the city: the International Finance Centre (IFC) and the International Commerce Centre (ICC). The ICC is one of the tallest buildings in the world, and its top floors are home to a Ritz-Carlton hotel and an open-air observation deck. In November, SHKP bought the plot of land next to ICC from the government for a record HK$42 billion.
The Lees
Henderson Land Development
Founded in 1973
Lee Shau Kee founded Henderson Land Development and went on to become Hong Kong’s second-richest man. He snapped up millions of square feet of old buildings and farmland, amassing the biggest agricultural land holding among the big developers today. Henderson has some 1.2 billion square feet—roughly the land area of Macau—plus parking for 267 cars at One IFC, Two IFC and Four Seasons Place. Batman jumped between the buildings in the 2008 film “The Dark Knight.”
The Lis
CK Asset
Founded in 1972
Li Ka-shing is the richest man in Hong Kong. The companies he founded own the most buildings of the Big Four. His son now heads his two main companies, which includes the developer behind more than 100 developments in the city. CK Asset Holdings sold The Center for HK$40.2 billion in 2017 to a group of investors—making it the most expensive commercial building sale in the world. Cheung Kong Center is home to Li’s office and was designed with feng shui demands in mind. The public areas at its base are situated below ground level to prevent money from flowing out of the building.
The Chengs
New World Development
Founded in 1970
Henry Cheng’s New World manages and operates a highlight of the city’s skyline: the Hong Kong Convention and Exhibition Centre. Reminiscent of the Sydney Opera House, the building extends into Victoria Harbour on an artificial island constructed in 1988. In recent years, the company has led development of the HK$20.3 billion Victoria Dockside project, which includes 1.2 million square feet of retail space, a world-class art collection and a rooftop urban farm. Third-generation heir Adrian Cheng billed it the “Silicon Valley of Culture” for the global millennial.
The Big Four’s reach extends beyond the city center to just about every corner of the semi-autonomous region. They have developed properties in all 18 districts, including at least 350 commercial and residential developments.
- Sun Hung Kai
- Henderson
- CK Asset
- New World
- Country parks
- MTR railways
Their holdings are more impressive when you consider that about 40% of Hong Kong’s land—equivalent to more than half of New York City—is protected from development as country parks. Meanwhile about 7% is zoned for residential use, compared to about 14% in Singapore.
Hong Kong Land Use
Protected
country parks
40%
Other
countryside
30%
Agriculture 6%
Commercial 3%
Transportation 6%
Residential 7%
Other 8%
Source: Planning Department of HKSAR
All told, the tycoons’ companies have about HK$2.9 trillion in total assets—greater than the size of Hong Kong’s annual GDP.
The Reach is a neighborhood
co-developed with Henderson
The Reach is a neighborhood
co-developed with Henderson
Sereno Verde is
a neighborhood
co-developed
with New World
The Reach is a
neighborhood
co-developed
with Henderson
The government has its eyes on their sprawling agricultural land banks. The four developers hold about a fifth of Hong Kong’s farmland, most of which is near the border with China. Chinese state media and others have accused the tycoons of using these holdings to manipulate the already scarce supply of available land, a main driver of Hong Kong’s sky-high property prices.
Alice Poon—author of “Land and the Ruling Class in Hong Kong” and former personal assistant to Kwok Tak-seng, the late Sun Hung Kai founder—called it a “vicious cycle” in which a few developers with vast land banks control supply, drive up prices nearby and feed government coffers through taxes in the form of land premiums. Those taxes account for about a quarter of the government’s total annual revenue, according to Financial Services and the Treasury Bureau. The government reinvests the proceeds from the premiums into big infrastructure projects, Poon said, further driving up land prices.
Developers have complained it can take years—or decades—to convert farmland for development. The government, meanwhile, has prioritized a $64 billion land reclamation plan that includes an artificial island roughly three times the size of New York’s Central Park.
China Pressure
China’s pressure on the tycoons may be having an impact: Some of the Big Four have recently drawn up charitable plans to help ease the housing shortage. Shortly after the Communist Party mouthpiece People’s Daily published an editorial calling for land seizures, the Cheng family’s New World Development pledged 3 million square feet—or almost 20% of its farmland—for affordable housing.
The next day, the Lee family’s Henderson Land Development offered 1 million square feet of its farmland—less than 1% of what they own—if the government aims to resume the land for public housing. Separately, the company said it planned to lend 430,000 square feet of farmland to the Hong Kong government for 7 years for transitional housing units. The company declined to comment.
Li Ka-shing has offered HK$1 billion—rather than land—for small- and medium-sized businesses. CK Asset said that while developing agricultural land is a long and complicated process, Li Ka-shing has over the years donated more than HK$26 billion, about a tenth of his current net worth.
Kwok-controlled Sun Hung Kai, whose shopping malls have been targeted by some protesters, said in a statement it gave a total of 16,000 square feet for two separate initiatives over the past four years—a tiny fraction of its total holdings. Separately, the company said it expected “reasonable compensation” if the government seized its land for public housing.
Adam Kwok, one of the group’s third-generation heirs who recently attended a pro-Beijing rally, said the group plans to expand its charitable activities. “Not enough is being done in social housing,” he told Bloomberg last week at the launch of the group’s new Alva Hotel by Royal, as servers made the rounds with glasses of champagne.
Vast Farmland Reserves
Some developers loaned portions of their agriculture land banks for housing initiatives
3.6
Government
9.3
1.6
Henderson
4.3
12
Others
31
Loaned 430,000 sq. ft.
<1%
19.4
sq. mi.
Total
farmland
50.4
sq. km.
1.1
SHKP
2.9
Donated 10,000 sq. ft. in 2016
for Sheng Kung Hui Council’s
planned integrated service centre,
which includes a youth hostel
<0.1%
0.6
New
World
1.6
0.5
CK
1.3
Loaned 3 million sq. ft.
for a social housing project
18%
3.6
Government
9.3
1.6
Henderson
4.3
12
Others
31
19.4
sq. mi.
Total farmland
50.4 sq. km.
<1%
Loaned 430,000 sq. ft.
1.1
SHKP
2.9
Donated 10,000 sq. ft. in 2016
for Sheng Kung Hui Council’s
planned integrated service centre,
which includes a youth hostel
<0.1%
0.6
New World
1.6
0.5
CK
1.3
Loaned 3 million sq. ft.
for a social housing project
18%
19.4 sq. mi.
Total farmland
50.4 sq. km.
3.6
Government
9.3
0.6 New World
1.6
1.6
Henderson
4.3
1.1
SHKP
2.9
18%
0.5 CK
1.3
<0.1%
<1%
12
Others
31
Loaned 430,000 sq. ft.
Donated 10,000 sq. ft. in 2016
for Sheng Kung Hui Council’s
planned integrated service centre,
which includes a youth hostel
Loaned 3 million sq. ft.
for a social housing project
19.4 sq. mi.
Total farmland
50.4 sq. km.
3.6
Government
9.3
1.6
Henderson
4.3
1.1
SHKP
2.9
0.6 New World
1.6
18%
0.5 CK
1.3
<0.1%
<1%
12
Others
31
Loaned 430,000 sq. ft.
Donated 10,000 sq. ft. in 2016
for Sheng Kung Hui Council’s
planned integrated service centre,
which includes a youth hostel
Loaned 3 million
sq. ft. for a social
housing project
Sources: Planning Department of HKSAR, company filings, 2018 annual reports, Bloomberg reporting
New World’s donated farmland, by far the most as a proportion of its holdings, will be partly loaned to Light Be—a social housing organization the Chengs have supported for years that allows young families, single mothers and at-risk individuals referred by social workers to pay rents of about 20% to 40% of the market rate. Carson Ho, one of the beneficiaries, became self-sufficient enough after two years to start his own air-conditioning maintenance company.
It’s not yet clear if the social housing scheme is scalable, but Light Be founder Ricky Yu is optimistic. Yu, a former manager in Hong Kong for direct sales company Amway Corp., said he hopes it will create a channel between the social classes so that rich and poor can “coexist without a sense of resentment.” New World said in a statement the Light Be projects are intended to “inspire more people to generate creative approaches” to housing.
Still, many doubt that billionaire philanthropy alone can solve the city’s housing crisis, especially when coming from land barons. Prices have quadrupled over the past two decades, vastly outpacing median incomes.
Runaway Home Prices
Many Hong Kongers are shut out of the market
- Change since 2001
- Centaline Property Leading Index
- Median household income
350%
300
250
200
150
100
50
0
-50
2001
2019
350%
300
250
200
150
100
50
0
-50
2001
2019
350%
300
250
200
150
100
50
0
-50
2001
2019
350%
300
250
200
150
100
50
0
-50
2001
2019
Sources: Census and Statistics Department of Hong Kong, Centaline Property Agency Limited, compiled by Bloomberg
Brian Wong, a member of Liber Research Community, an independent think tank based in Hong Kong, labeled the land donations a “PR stunt” aimed at preempting seizures by the government. It’s on the administration to fix housing because tycoon social housing has too many conflicts of interest, he said.
Others say the tycoons are only giving up lands with the least potential for development, and that they may expect something in return for their charity. New World’s stock rallied 2% the day after it announced its social housing plan.
Regardless of whether their contributions make a dent in the city’s housing problem, polls show the Big Four are unlikely to quell the outrage fueling the protests, let alone anger over housing.
Hong Kongers largely blame policies that brought an influx of about 1 million mainland immigrants since the 1997 handover for the 5-year wait for public housing. Dissatisfaction with Hong Kong’s government is also at record highs, especially over human rights and the pace of democratic development.
David Webb, an activist investor who has lived in Hong Kong for almost three decades, said the tycoons would ultimately fare better in a harmonious democratic society rather than one with autocratic rule, detention without trial, curbs on the internet and an exodus of talent. And that means they should be pushing for meaningful elections rather than focusing on land donations.
“If anything, it kind of angers people that they feel the need to do this, to engage in this kind of gimmickry,” Webb said. “The root cause is lack of democratic accountability.”