Hong Kong’s urban renewal chief defends costly plan to buy up To Kwa Wan property for redevelopment
Move to purchase residential units at record-breaking price part of authority’s profit-making plans, Wai Chi-sing says
The Urban Renewal Authority’s chief has defended the body’s proposal to acquire old residential units in To Kwa Wan at a record price of HK$15,900 per square foot, saying the decision was made with reference to the property prices in the area and established mechanisms.
Wai Chi-sing, managing director of the authority, also warned that the body could be facing financial deficit in six to seven years’ time if its profits could not support its new projects.
The URA has been planning to demolish three groups of old residents buildings in To Kwa Wan, and redevelop the area into private housing flats. It announced on Wednesday that it would pay each of the hundreds of affected landlords a record-setting HK$15,916 per square foot so that the project can get underway.
Critics were concerned that the record price means that the authority will be building yet another luxury residential complex “to make profit”.
But Wai told TVB’s On the Record programme on Sunday that the authority was simply following the established rules, making reference to the property price in To Kwa Wan, and independent consultants’ reports.
“I tried not to use the word ‘profit-making’, but we do need make revenue, otherwise we cannot continue to purchase old buildings, and to renew them,” he said, in a reference to the authority’s obligation to be self-financing and not reliant on the government.
Wai also said the authority needed to make sure that its financial reserve was large enough before another economic downturn hits Hong Kong’s property market.
“If we are purchasing [old] units at a high price, and selling [redeveloped] units at a low price, and we were not well-prepared for it, it is very likely that we will … have a very huge deficit,” Wai said.
In July, the authority announced a HK$1.3 billion plan to tear down a cluster of dilapidated buildings in Sai Ying Pun to provide 165 new flats and thousands of sq ft in commercial floor area and open space by 2027.
In a reference to the project, Wai said: “I believe we will set yet another new record when we announce the purchase price early next year.”
But Wai also estimated that the authority could face a deficit in six to seven years as the limited plot ratio in old neighbourhoods would hinder the “redevelopment potential” of the authority’s future projects.
“We have been using the revenue from past projects to subsidise new ones, and there will be a deficit when the subsidy is not large enough … It will appear even if there is little change and stable development in the property market,” he said.
The last time that the authority ran into a deficit was in 2013-14, when it amounted to HK$2.27 billion. From 2014-15 to 2016-17, its yearly surplus ranged from HK$1.1 billion to HK$4.4 billion. By March this year, its accumulated surplus and net assets amounting to HK$22.6 billion and HK$32.6 billion, respectively.
But Wai said only about half of the net assets was the authority’s cash flow, while the remaining half were from old buildings, which are “not that valuable”, owned by the authority.
“I think our level of net assets was still quite low,” he said, adding that the authority need to purchase more old buildings “to keep up with the pace of urban decay”.