Unrealistic prices demanded by owners of older Mid-Levels flats are scuttling en bloc buyout bids from developers hoping to refurbish the blocks and put them back on the market as luxury units. That is the view of Au Wing-wah, chairman of Richfield Group Holdings, a Hong Kong-listed investment holding company providing property brokerage services. Acting as agent and intermediary on behalf of developers, Richfield has been involved in negotiating with owners of about 100 old buildings in Mid-Levels, Mid-Levels West, Shau Kei Wan, Causeway Bay, North Point, Ho Man Tin and Prince Edward Road. Its role is to reach agreements with a sufficient number of owners to allow en bloc sales to proceed so that the blocks could become available for redevelopment. Mr Au said the reaction of developers to proposals brought up by Richfield had been positive, with most of them interested in acquiring redevelopment properties in Mid-Levels. However, he said many individual flat-owners, particularly those in Mid-Levels, had responded to the developers' interest by aggressively raising their asking prices after seeing the property market turn active in the last few weeks. 'Flat-owners in Mid-Levels raised their asking prices by 8 to 10 per cent,' he said. He believed this was triggered when Emperor International Holdings sold its 9A-H Seymour Road site for HK$10,027 per square foot and Swire Properties won its court suit for relaxing development restrictions on its Mid-Levels project last month. 'Flat-owners believed developers would be willing to go further to buy their units,' Mr Au said. 'But actually their asking prices are at least 5 to 10 per cent higher than the developers are willing to offer and much higher than the banks' property valuations.' For example, he said the asking price for flats in a 42-year-old building at Babington Path in the area was about HK$11 million in September, but owners were now asking for HK$13 million. He said many owners had ignored the fact that the government might impose development restrictions in Mid-Levels in the near future. 'The asking prices jumped sharply in the last few weeks and, as a result, our acquisition plans in Mid-Levels have been put on hold,' Mr Au said. 'Developers have raised their offers by 5 to 10 per cent, but they are still lower than the asking prices.' Citing the case of Merry Court on Castle Road as an example, he said some of the flat-owners in the block had asked for HK$2.4 billion for the estate. That translated into an accommodation value of about HK$16,000 per square foot - an improbable cost since the developer could not get additional plot ratios through the proposed redevelopment. This drove Richfield to put the acquisition plan on hold. Now Mr Au expects the acquisition of old properties to be put on hold for the next few months and to turn active only after the flat-owners see the prices of second-hand flats record a mild growth next year and become more realistic in their expectations. Mr Au has been involved in the acquisition of old buildings for 20 years in his private capacity. He withdrew from the market for a short period until it began recovering in the second half of 2003 and developers became interested once again in acquiring old buildings for redevelopment. Richfield then began to identify old buildings with redevelopment potential and bid to reach sales agreements individually with flat-owners. It would then buy the units once 90 per cent of the owners have agreed to sell, and sell the property to developers. He said developers were interested in buildings that are at least 40 years old, have a site area of more than 6,000 square feet, are not subject to land premium levies for redevelopment, and can gain an extra plot ratio. The Hong Kong government is examining changes to the existing law covering en bloc sales with a view to allowing owners to call for a compulsory sale if they have acquired the necessary approvals from 80 per cent of owners in a strata-titled building. A 90 per cent approval is required. Mr Au said the number of en bloc deals by developers was likely to increase about 50 per cent if the amendment went ahead, and this would encourage urban renewal.