HONG KONG -- A 20-minute minibus ride from Hong Kong's northern Sheung Shui rail station, followed by a 10-minute walk into the mountains, leads to a panoramic view of the border with mainland China -- tranquil wetlands sitting side by side with Shenzhen's forest of skyscrapers.
Hong Kong's Northern Metropolis project seeks to turn this barely developed area into a new urban center. The plan set out in October , spanning about 300 sq. km of the northern New Territories, aims to build as many as 926,000 homes for 2.5 million people to alleviate Hong Kong's chronic housing shortage and create a new tech industry hub.
The strategy offers China's government an opportunity to pull Hong Kong's center of gravity northward, away from the distant Hong Kong Island, and further the territory's integration with the mainland.
Big developers have taken notice of the area's potential, particularly around the new and extended rail links envisioned as part of the project.
Wheelock Properties paid an unexpectedly high price at auction for an unused plot there last year as it looks to invest 7 billion to 8 billion Hong Kong dollars ($900 million to $1 billion) on housing development. Sun Hung Kai Properties has plans for a 36-building residential complex with 9,940 units. CK Asset Holdings wants to build housing near the site of a possible new train station.
Home prices rose faster between 2016 and 2020 in the northern and northwestern New Territories, areas covered by the Northern Metropolis plan, than in Kowloon, according to Jones Lang LaSalle.
"In the short term, with land and housing supply unlikely to rise notably while investors may start to front-run the market, property prices in the Northern Metropolis will likely be subject to more upward pressure than the rest of Hong Kong," the real estate services firm said.
An index of existing-housing prices calculated by Centaline Property Agency is up compared with the start of 2021 in the New Territories, contrasting with declines for Hong Kong Island and Kowloon.
Transportation infrastructure in Hong Kong's northern periphery has been slower to materialize than on Hong Kong Island, the territory's economic and political nerve center, and land use rights held by indigenous residents have hindered development.
But Hong Kong's urban core is short on land, and housing demand chronically exceeds supply. The territory also finds itself outpaced by Shenzhen across the border. The mainland city has a higher gross domestic product than Hong Kong and is home to the likes of Tencent Holdings and Huawei Technologies.
The territory's government aims to use the Northern Metropolis project to build an economy less reliant on the finance industry. Financial Secretary Paul Chan Mo-po said the goal is "dumbbell-shaped" development, with the north focused on innovation and technology and the south on finance.
The Northern Metropolis project carries added significance for President Xi Jinping's government. Beijing aims to develop the Greater Bay Area of Hong Kong, Macao and Guangdong Province as a unified economic zone. Elements of the Hong Kong plan, including a rail link between the territory and Shenzhen, could accelerate this integration.
China also hopes to speed the process by pulling part of the territory's core away from Hong Kong Island, which is distant and holds vestiges of British rule like Victoria Peak, a luxury residential district favored by Chinese executives.
The project faces challenges. Hong Kong's government has not dropped its plans for huge artificial islands near Lantau Island to create space for relieving the housing shortage, and it has not specified where funding for these two massive undertakings would be found.
"The project's time span is too long and much could be changed," said Brian Wong at think tank Liber Research Community. "This is blatantly putting Hong Kong in a supporting role for Shenzhen."
The struggles of Chinese developers also loom over the project. China Evergrande Group had an ultra-luxury housing project near Shenzhen seized by a creditor after defaulting on a loan, and Kaisa Group unloaded assets in the New Territories late last year.
Additional reporting by Frances Cheung