TNAG-0672-FCO40-821-Legislation-for-Crown-lands-in-Hong-Kong-1977 — Page 126

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CONFIDENTIAL

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XCC(77)14

the degree of popularity largely depending on the state of the land market and the amount of land available for exchanges. Suggestions for reduction of the exchange ratio from 5:2 to 5:1 or for its abandon- ment in favour of increased cash payments have produced very strong opposition. Just how acceptable (and therefore how effective) the system will remain is likely to depend on much the same factors and, additionally, the general view taken by developers on the viability of property develop- ment as the New Territories lease term diminishes. The present land market and interest in exchanges is very strong, but this interest may not continue indefinitely. Sooner or later landowners may wish to receive cash, and it is in Government's interest to reduce the commit- ment as much as possible in the meantime,

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In 1975, an attempt was made by Government to meet this contingency. It was considered desirable to establish an acceptable cash alternative to the exchange system at a time when the outstanding Letter B commitment was exceptionally large and when the land market was depressed. This resulted in the approval of proposals (set out in memorandum XCC(75)60 (Annex D))that the value of agricultural land surrendered should be assessed not at its restricted agricultural value, but at the value at which exchange entitlements for agricultural land were changing hands in the open market, i. e. a value which reflected the expectation of an exchange offer. At that time this was assessed as $10 per square foot. It was hoped that some would find a cash pay- ment of this amount an attractive alternative to an exchange entitlement.

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The Secretary for the New Territories considers that any attempt to cease issuing Letters B at this time would result in serious opposition, which might well cause long delays to the New Towns development programme. He considers, however, that the level of the optional cash offer (which has remained at $10 per square foot since its introduction) should be reviewed. The present market value of recently issued letters is about $17.00 per square foot and the $10 per square foot offered as the surrender value provides no incentive to accept cash in lieu of an exchange. Simply to reassess the stated surrender value of new Letters B at $17.00 per square foot would provide little further inducement to accept cash instead of an exchange, because the prospect of an increased deduction from premium would increase their open market value. It is accordingly proposed that the stated surrender value of $10.00 per square foot should remain unchanged, but that for resumptions gazetted after 1st April 1977 an amount of $7.00 per square foot additional to the surrender value should be payable in cash provided that the option to accept cash is exercised within 3 months of the date of surrender of the old land.

CONFIDENTIAL

機密