Mortgage scheme boost for preservation

PUBLISHED : Saturday, 28 August, 2004, 12:00am
UPDATED : Saturday, 28 August, 2004, 12:00am

The idea that there is a better way of dealing with old buildings than simply knocking them down has long been recognised - and acted upon - in big cities around the world. Sadly, it has been slow to surface in Hong Kong.

Now, at last, there are signs that this position is changing. A new approach is being taken that favours renovation, rather than demolition. It is an approach that promises to transform - and improve - our urban environment.

The first sign of a shift in policy came in May when the Urban Renewal Authority announced a $210 million scheme to offer interest-free loans and subsidies to help owners of old buildings repair and 'rehabilitate' their homes.

This was followed yesterday by the news that seven banks are prepared to offer much more attractive mortgage services to owners of these buildings than has previously been the case.

It marks the end of the traditional reluctance of Hong Kong's banks to offer mortgages for properties that are more than 30 years old. One of the biggest obstacles to developing a vibrant market in older buildings has therefore been removed. It is an important development from which many positive consequences could flow.

As the managing director of the URA, Billy Lam Chung-lun, points out, the granting of easier access to mortgages could bring to an end the vicious cycle that has led to so many buildings in our older neighbourhoods becoming dilapidated - and then demolished.

Owners have had little incentive to renovate their homes, or collectively to keep their buildings well maintained, because finding a buyer for them would always prove hard. Buyers would not only find mortgages hard to come by, they were usually granted on very unattractive terms. As a result, many felt it was better to let their properties fall into disrepair. That way, the URA might be forced to step in and knock them down. This would enable the owner to pocket compensation.

The new scheme will give owners a reason for maintaining and renovating their properties to a high standard - they will be able to sell them. If the idea catches on, a new secondary property market will be born. More important, however, is that it might just save many of our city's older districts from the bulldozer.

The participating banks are prepared to offer loans of up to 70 per cent of the value of the property. The repayment periods are to be extended and the interest rates improved. A survey conducted by the URA suggests many owners will be interested.

One potential drawback is the limited scope of the arrangements. Only properties renovated through the URA aid schemes - the ones launched in May - will qualify for the mortgages. This is because the banks see the scheme as a guarantee of quality. The aid schemes are expected to be extended to more than 32,000 units over the next five years. But this represents only a very small proportion of our city's old buildings.

Perhaps the URA could find a way of persuading banks to also grant mortgages in relation to suitable buildings outside the aid scheme. A system of quality accreditation might be the means by which this could be achieved.

The new mortgage arrangements are a modest beginning. But they are welcome evidence of a much-needed change in attitude.

If the arrangements are a success, more banks can be expected to get involved. In time, the renovation and sale of old buildings might just catch on.

We are already seeing greater public awareness of the need to preserve our physical heritage. This has been evident in the controversies over such fine architectural specimens as Kom Tong Hall and colourful old neighbourhoods such as Lee Tung Street - better known as Wedding Card Street - in Wan Chai.

The new mortgage arrangements can help ensure that our links with the past are preserved rather than removed.