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Village people
There are some great savings to made on New Territories’ homes. But before taking advantage of the discounts, do your homework, advises Alex Frew McMillan, as there are area-specific risks involved
The slump in the property market is making village houses in the New Territories affordable again. But it’s hard to find places that have it all – a good view, in a nice village with easy access.
There are around 30,000 village houses in Hong Kong, with the greatest concentration in Yuen Long and Tai Po. The area around Clearwater Bay and Sai Kung is particularly popular with both locals and expatriates alike, with easy access to Hong Kong Island through the Eastern Harbour Crossing.
Sheung Sze Wan and Lobster Bay in Clearwater Bay are the two most popular villages with expats, and the most expensive. Houses along the waterfront can sell for as much as HK$40 million. But if you don’t need a great view and are happy looking into someone else’s backyard, it’s possible to find a 2,100 square-foot pad for much less. One house in Lobster Bay that is surrounded by other homes, and will have two houses built next to it, is on the market for HK$8.5 million.
Nearer Ma On Shan, two villas – Sentosa Villas – with seafront views sold in April for HK$10 million each. They had initially been on the market for HK$12 million or more. They have a lovely location with a view of Three Fathoms Cove, or Kei Ling Ha Hoi. The village is a quiet one, with a great road leading into it, courtesy of a government water-pumping station nearby. And they’re virtually right on the MacLehose Trail, between Ma On Shan Country Park and Sai Kung West Country Park.
Many villages aren’t as easy to access. The road into Sheung Sze Wan, for instance, is narrow, amateurishly built in places, and filled with the occasional pothole. There’s a gutted waterfront home for sale at the end of it, where the asking price seems to vary wildly depending on how the seller feels about the stock market – it has been vacant for a year, and the price ranges from HK$8.5 million to HK$13 million depending on when you ask.
Word is that the seller is in financial trouble and would agree to a quick sale. But with village houses, there always seems to be some kind of catch. The previous owners of the gutted house in Sheung Sze Wan have drilled through the roof, which contractor Tsang Pui-kai with Lee Kai Engineering Co. says likely means the waterproof membrane has been ruined.
There are already signs of water seepage on the ceilings of the upper floor. This means the costs for a contractor would start at HK$1.5 million in cash.
David Cheng, a designer and the director of the Sheung Wan-based company Desirable Creations, explains that this estimate is based on keeping the existing layout “and replacing all aluminium windows, 100 electrical sockets, all wall and ceiling plastering and painting, plumbing and drainage pipework”. The price also includes labour to install floor tiles, plus wall tiles for the kitchen and bathrooms.
The contractor’s quote excludes the purchase of all bathroom suites, kitchen cabinets and electrical appliances, plus the extensive cost of replacing the waterproof membrane of the flat roof. You’ll also need to add on the cost of any exterior work, not to mention the down payment to buy the building. On top of that there’s the designer’s fee of 12 percent. Then you can start to think about paying for fixtures and fancy flat-screen TVs.
Simply put, we’re talking a lot of money. Since it is a seafront property, somebody will probably make a lot of money, too, turning it around. But it could be a life’s work. And there are two empty houses that stand as a warning just down the road – they have not been issued the ‘Certificate of Compliance’ necessary for someone to live in them because the slope behind them is unsafe.
There were also issues with Sentosa Villas. Two brokers originally said the extensive green terraces attached to each villa were in deed. When you examine the lot plans, however, it turns out they are in fact land that must be rented from the government.
This is not unusual with village homes, but it does affect the value – an in-deed garden is worth a lot more. And your expenses rise if you go the aboveboard route and pay monthly rent to the government. Some owners just ignore it and take the chance that the government won’t call them on it.
Then there was the issue of the conversion premium: Sentosa Villas are new. Since village houses were intended to – surprise, surprise – house villagers, any developer trying to sell one on to a non-villager, or the non-villager who buys one, has to pay a premium to convert the title to their own use.
Again, two brokers with Century 21 initially said the premium had been paid. But when they checked with the developer, it turned out it had not. The developer wanted a sizeable down payment to start on the process.
Lawyer Herman Hui, with the Central-based firm of Herman H.M. Hui & Co., advises potential buyers to tread very carefully in such a situation. “A developer who is so tight on his finances that he doesn’t have the money to pay for the conversion must be very exhausted in his financing – that’s my worry,” he says.
There are situations – which Hui did not suggest at all apply in this case – where developers take deposits on village homes or plots of land they are developing, and then simply skip town with HK$10 million or so in their pocket.
“If you are paying the premium directly to the government, I would feel much more comfortable,” Hui says.
Village homes are one of the only ways in Hong Kong to get a country-living atmosphere, and a lot of space to boot. But keep a close eye on what you’re being offered – by law, all modern village homes have to be built the same size (2,100 square feet), on three floors of 700 square feet each.
Some older village homes are smaller, but no village house can have a floor plan for a roofed-over area larger than 700 square foot. The buildings also can’t be over 27 feet high, limiting them to three floors. There are also restrictions on the size of any balcony and various other stipulations on how thick the walls must be, how big the water tank can be and so on.
The standardised size is a product of the origin of village houses. Village houses are technically known as ‘small houses’, and were brought into being by the New Territories Small House Policy, which was introduced in 1972. The law gave any male heir over the age of 18, who could prove he was descended from one of Hong Kong’s original villages in 1898, the right to build a small house on a plot of land.
Some of the houses in the New Territories have great views of the sea, or of pleasant hillsides. You’re a world away from the cityscapes of Central. But don’t take those views for granted. Any plot that can be turned into a house probably will be.
“No view is ever protected – there is almost no actual assurance that your view will never be blocked,” says Hui.
Nevertheless, the downturn has made it more attractive to scout around for good village homes. And although the market has started to pick up, you still have time to do your homework on a purchase to avoid the worst problems.
“Now that the market is slower, you have the time to stall the signing of the sales and purchase agreement until you have conducted an investigation,” Hui advises.
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