Saturday, August 5, 1972
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The letter stressed that the rent was the sum which a lessee might
reasonably expect to pay if he were to pay monthly or annually for the right to
renew the lease and use the property for a further term.
Referring to the Association's point concerning the inclusion of compound
interest at five per cent in the re-assessment, the Colonial Secretary made it
clear that no interest was charged on the re-assessed rent.
"The Director of Public Works, in calculating the rent for renewal,
assesses the capital value of the land in question by reference to open market
sales of similar land in the vicinity and then assesses the renewal rent as a
percentage of this capital value.
To determine the true annual value at Hong Kong interest rates, a return
of 12 per cent would be realistic for this type of investment in land but a rate
of five per cent has been used in the past; and now, as a result of the concessions
recently announced by the Government, the calculation of renewal rent has been
further reduced by 20 per cent, or by the equivalent of a reduction in the
percentage rate from five per cent to four per cent."
In addition to the 20 per cent reduction, renewal rents will be phased
in gradually. A payment of only 50 per cent will be required in 1973 rising to
the full rent after five years.
Lessees have renewed on this basis in the past and numerous applications
have been made for renewal in recent months in advance of the expiry of the first
term of the lease. This is further evidence that lessees and their professional
advisers have been, and are aware of the terms of renewal, and accept them.
Besides these concessione, the Colonial Secretary pointed out in his letter,
nit should be remembered that there will be no increase in rent in respect of pre-war
property unless and until it is re-developed; and also that the re-assessed rent in
respect of under-developed post-war property, if the lessee so wished, will be less
than for fully developed property until the property is re-developed to its full
economic capacity."
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