Advertisement
Advertisement

Developers attracted by a sense of history

Property developers are showing an increased interest in buying old colonial-style historic buildings as long-term investments.

Once reluctant to buy such buildings in the absence of an unambiguous government policy on their status and uncertainty over their future potential, developers are now throwing those cautions to the winds.

At the end of last month, Ryoden Development bought the official residence of the French government at 8 Pollock's Path on The Peak for HK$580 million. Based on the sales and purchase agreement, the house will be leased back to Paris for a monthly rent of HK$250,000 for two years - a below-market rate.

The house was built between 1880 and 1890 and is listed as a grade two historic building by the Antiquities and Monuments Office, which says demolition or building work such as alternations or renovations works that may affect the heritage value is 'not encouraged'.

Earlier this year, Couture Homes, the new residential arm of listed CSI Properties, bought the nearly 80-year-old Villa Blanca at 47 Barker Road on The Peak for HK$200 million for a long-term investment.

'We will renovate the house soon for leasing, as it is too old. But we won't change the layout and the exterior,' said Jimmy Fong, Couture's managing director.

He expects the property, which commands a view of Victoria Harbour, to be leased for more than HK$250,000 a month.

'As the outlook for historic buildings is uncertain, many companies are hesitant about buying. But we were not looking to make a lot of money when we planned to buy the house,' said Fong. 'There are only a few colonial-style buildings in Hong Kong and there are fewer luxury residential sites on The Peak available for sale.'

'We didn't want to miss this chance,' he said. Couture has received many inquiries about leasing the property.

Koh Keng-shing, managing director at Landscope Realty, said expatriates from Europe and the United States would have a keen interest in leasing colonial-style houses due to their cultural background. 'And only the owners of corporations and top management of investment funds could afford the rent,' he said.

Koh believed developers were willing to take investment risks to acquire historic buildings since there were fewer sites available for development, particularly in traditional luxury living areas.

Marcos Chan Kam-ping, head of research at property consultancy Jones Lang LaSalle's Greater Pearl River Delta office, said the average rental yield for luxury housing was presently just 2.1 per cent.

'There are many cases of rental yields below 2 per cent. But there are few sites available for sale and even though developers cannot redevelop such properties they can still enjoy the appreciation in capital value in the long run,' he said.

Koh said leasing demand for single houses on The Peak and in Island South had increased due to the expansion of the financial sector in Hong Kong. 'Five years ago, if a lease amounted to HK$200,000 a month it was regarded as a lot. But now it is common to see properties leasing for up to HK$400,000 a month,' he said.

The strong rise in leasing costs was driven by the influx of senior management to Hong Kong, said Marcos Chan of JLL.

'The rental movement of luxury properties is closely correlated with the office leasing market. Last year, the take-up rate of office space reached 3.7 million square feeot - the highest level since 2000 - and average rents of luxury residential properties jumped 20 per cent at the same time,' he said.

According to Knight Frank, the vacancy rate of houses on The Peak and in Island South was down to just 1 or 2 per cent. Thomas Lam Ho-man, head of research at the firm, said luxury residential rents had increased by about 10 per cent in the first five months of the year. He expected they would continue to increase steadily as supply was tight.

Post