April_1965 — Page 33

Letters

Sir,

Housing and the Private Developer

THE Hong Kong Financial Secre- tary in his recent Budget Speech said:

"We must continue to rely substan- tially on new private housing, both because we are most unlikely to have the resources to do otherwise, and because we must not create a situa- tion where a large part of the population has the privilege of hav ing its housing subsidised from public revenue to which the less fortunate minority also contribute. An adequate field must therefore be left open to private enterprise hous- ing: and government subsidised housing must not be allowed to de- press rents below the level to which, with supply and demand in reason- able equilibrium, commercial rents might fall without inhibiting further private development."

What is the "adequate field” of which the Financial Secretary speaks, and can this be specifically defined as a potential of so many units of so many types? The answer to this, at the moment, would not appear to be available, but obviously such in- formation would appear to be essen- tial. It might be possible for the forthcoming Census to provide the

answer.

What would be "the level to which commercial rents might fall without inhibiting private development."

Ordinance Requiremcnts

With the shortage of land there can be no question other than the provision of high density, and with it, high rise tenements for the masses. Re-development of old properties on an economical basis would need to be on the same lines. The require- ments of the

of the Building Ordinance, and with which no issue is taken, in respect of communal staircases and passageways, lift lobbies, and indivi- dual kitchens and water closets in high rise tenements are such as to bring forward a point which has heretofore not been sufficiently ap- preciated. There are minimum re- quirements laid down for such essen- tial ancillaries and in consequence there would be an economic mini- mum overall area of tenement which can be built by private enterprise.

Government and Housing Autho- rity low cost housing estates are de- signed on large scales, and the per- centage of area taken up by ancil- laries to actual habitable modation is much lower in such estates than anything which might

accom-

Far East Architect & Builder April, 1965

be designed by private enterprise for newly leased land or re-development. Re-development is even more restrict- ed due to the necessary allowances having to be made for light and air. On this basis of design alone it is quite impossible for private enter- prise to even attempt to compete with Government subsidised housing.

Investment Return

Private enterprise does not enter the housing field for philanthropic reasons hence commercial rents can only be based on the return on in- vested capital. This return must not be less than 14% per annum before it can be considered commercial. The 14% is arrived at as follows: Nett return on invested capital 7.5% Amortization (20 years at 5%

compound interest) Rates and taxes Maintenance, insurance,

agency fees, etc.

Total

2.9% 2.7%

1.0%

14.1%

a

A return of 74% nett per annum on invested capital might, at first glance, appear to be high but any reasonable investor would want return comparable to something ob- tainable by investing in growth com- pany shares. Such shares would not only pay a respectable dividend but no amortization funding would be necessary, and in addition the value would appreciate in time. It must not be forgotten that the intrinsic value of money depreciates year after year. Again shares are readily disposable but the same cannot be said for property.

It is considered that the economic minimum area, measured overall, of a high rise tenement would be 600 sq. ft. which after the deduction of ancillaries would leave approximate- ly 350 sq. ft. of habitable space. At the rate of 35 sq. ft. per person such a tenement would accommodate 10 persons. High rise tenements of a smaller area have been built, mainly in order to cater to a particular price bracket of purchasers, but it is high- ly questionable whether these small tenements are designed with any sense of economics in view.

Rentals Charged

It might be possible, yet improb- able, for such a 600 sq. ft. high rise tenement to be purchased for HK$ 30,000 inclusive of all transfer fees, etc., and on this outlay an all-in rental, at a commercial rent, would

The

have to be $350 per month. Housing Authority equivalent, based on the average rentals per person as given in their Reports, would be $150 per month.

If a figure of $35 per sq. ft. is taken as being the building cost, exclusive of the cost of the land, but inclusive of foundations, services, architect's fees, etc., then the building cost of a 600 sq. ft. high rise tene- ment would be $21,000 and on this figure the all-in rental would be $245 per month. Thus the tenant would be paying $105 per month rent for the portion of land occupied by his high rise tenement. The economics of this would be obvious and any comment would be superfluous.

All this does not give the answer to the housing problem, rather does it tend to show that as matters stand today any thought of private enter- prise providing its share of housing, whatever that may be, at commercial rentals is not probable of fulfillment.

There is an answer, but its ramifi- cations might well affect the whole of the economics of the colony. This would be for Government to stipulate in all new development, or re-develop- ment, that sale by units would be de-barred. This would cause the short-term speculator to cease opera- tions but would also bring down the price of land and would leave the field open for the more genuine long- term investor, provided always that such exist.

Sir,

CONTRACTOR, Hong Kong

STREET FURNITURE

IN the October issue of the Hong Kong and Far East Builder, com- ment was made on the lack of detail design of civic structures and furniture (the point-duty policeman's shelter being noticed as a commend- able exception). Since then there have been erected outside the Hong Kong City Hall some well designed bus shelters, light and elegant in form with a strong horizontal line to the roof, and conforming well to

"

Bus shelters "light and elegant"

It the character of the City Hall. would be a safe guess to make that these were designed by an architect, but horror of horrors the bus stop sign! Has the bus company no soul?

Professor W. G. Gregory. Hong Kong.

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