Explore Island Investment In Hong KongLiving and investing in islands around the SAR can reach beyond Lantau — but it demands work
When most of us think about private islands, images of luxury six-star Santorini-like resorts and exclusive playgrounds for the rich and famous come to mind. Unfortunately, for all true escapists the bad news is buying a private island — the ultimate status symbol — is yet to be an option in Hong Kong. But still, many are increasingly eyeing islands as an alternative investment to multimillion-dollar shoebox flats (or dog kennels) in town.

Not for Sale
Hong Kong is home to dozens of outlying islands — 263 to be exact. While many are just bare rocks in the water without a dock, fresh water and power supply, Lantau Island (including Discovery Bay and Mui Wo), Lamma Island, Cheung Chau and Peng Chau are among the popular inhabited outlying islands around Hong Kong.

Not surprisingly, the government owns all lands in the city, with one exception: the land on which St John’s Cathedral in Central is standing. In other words, every purchase of land including islands is nothing more than a “lease” of a plot from the government. “We haven’t seen an island for sale here yet, not a single transaction,” observes Ricky Poon, executive director of residential sales at Colliers International. “Building on a deserted island from scratch is a huge investment.”

However, islands as a niche form of real estate have never been off the radar of land-hungry developers in recent years. This is particularly the case for well-developed outlying islands. As the laid-back vibe would seem a world away from Hong Kong’s hustle and bustle, investors see huge potential to acquire cheaper sites on islands for luxury residential, hotel and resort development.

Bargain Hunting
Earlier this year, several sites on outlying islands fetched prices way below market expectation. In March, Sino Land bought a nearly 50,000-square-foot residential site on Peng Chau, an island lying off the east coast of Lantau, for $19 million. That translates to just $500 per buildable square foot — far below market estimates of $150 million. However, surveyors predict prices of future flats could reach least two times higher than the land cost and as much at $2,000, bringing a high profit margin for developers.

But elsewhere in southern Lantau, the competition is much more fierce. An earlier auction of a tiny plot in Cheung Sha, barely enough to build a large villa on, attracted some 27 developers, including big daddies such as Hong Kong Land and Sino Land. Swire Properties snatched up the 6,000-square foot site for $93.5 million, or $15,000 per square foot, a record high for a residential site on the island. Similar land grabs were recorded on Cheung Chau by local developers recently.

In fact, large-scale residential development on outlying islands is not new. Lucrative projects are, surprisingly, not all that rare, from the low-density residential development in Discovery Bay back in the 1970s to the more recent development of private housing estate Park Island on Ma Wan by Sun Hung Kai Properties in 2002.

Nowhere to Go
Edward Yiu, assistant professor of department of real estate and construction at University of Hong Kong attributes the phenomenon to saturation of traditional luxury residential areas. Shortage of land and more stringent building regulations on flat sizes and numbers in downtown areas are prompting developers to turn to feasible alternatives on more remote islands.

Colliers’ Poon is less optimistic, citing Discovery Bay on Lantau Island as the only successful example among several others. “Having some basic amenities and infrastructure is the most important consideration for buyers, who are long-time urban dwellers,” he says.

The self-contained, car-free community in Discovery Bay is equipped with basic facilities and infrastructure: supermarkets, restaurants, clubhouses, ESF schools, a reliable 24-hour ferry service to and from Central — you name it. “All these help you forget the fact that you’re an islander,” Poon says.

But this idea of island shopping and owning your own paradise could be over-romanticised. Money might not be the most important prerequisite in joining the private island club. Acquiring land is one thing, but whether you’ll be granted a permit to develop and disrupt the natural habitat of a virgin island is another tricky matter in Hong Kong.

This is perhaps best illustrated by the situation on Lamma Island where developers’ stamina is put to test. Chief of King Wong Development Bobby Li, also dubbed the “landlord of Lamma”, is having a busy time ahead.

After acquiring new land from numerous cement factories, King Wong is ambitiously transforming the former hippy haven by building the island’s first five-star hotel. Also in the pipeline was a joint development with Agile, a property giant from mainland China, to turn south-eastern Lamma into a spa resort, luxury residence and a world-class marina hosting international sailing races, had it not been rejected by town planners earlier.

Island investment can be promising yet resource-draining at the same time. “It takes tremendous vision and devotion to have an island developed, not to mention loads of patience, if you have any,” concludes Poon.