(7)
(8)
CONFIDENTIAL
2
specific building or engineering work, a land exchange system was initiated, the basis of which is as follows:
Agricultural land is exchanged at a rate of 5 square feet of surrendered land for 2 square feet of new building land, and a premium is paid representing the difference in value between the surrendered land and the new land granted assessed on values prevailing at the time of surrender. Building land resumed is exchanged on a foot-for-foot basis with a premium payable of the difference in value between restricted village building land and land capable of urban development. The land in exchange is made available in any of the town areas to which the 5:2 system applies, but exchanges cannot be concluded immediately on surrender of the old lots because of time needed to complete development works: owners of surrendered land are therefore issued with a letter specifying their exchange rights. exchange rights may be (and usually are) assigned and sold to others.
These
The 5:2 ratio was worked out on the basis that within towns about 3/5 of the land was required for public roads, housing, schools, etc., and 2/5 available for private development. Resumptions for town development have gone on since 1960 and in almost every case landowners have accepted and are still accepting the land exchange offer. But in the last few years the scale of resumptions, which run some years in advance of the completion of development works, has grown and the amount of land left in the towns for private development has decreased because of the increased public housing programme. As a result there is a backlog of outstanding exchange commitments: this is causing concern and effort is being put into reducing this.
Land values have increased about 20-30 times since the exchange system began. Those who have held on to their exchange rights own a very valuable asset because the premium payable on exchange is calculated at the date of surrender. Suppose a former landowner has held on to his exchange rights, here is how it would work for an exchange in 1977:
10,000 square feet of agricultural land
resumed and surrendered for Tsuen Wan town development in 1961 then valued at $1 psf =
5:2 exchange rate entitles owner to
4,000 square feet of building land in exchange
$
10,000
CONFIDENTIAL
/4,000