Developers may turn to older buildings in other districts after Mid-Levels restrictions Old buildings in Western, Kennedy Town and Wan Chai will be the next acquisition targets of developers after the government imposed building height restrictions in Mid-Levels last week, property analysts say. Developers have aggressively targeted old buildings in luxury residential areas for redevelopment in recent years, with Mid-Levels a favoured location. However, their hopes of cashing in by significantly increasing the saleable gross floor areas of the redevelopments were dashed last week when the Town Planning Board imposed height limits in the area. Under the restrictions, buildings will be limited to heights of between 170 and 320 metres. A developer affected by the new rule is Cheung Kong (Holdings), which acquired the 28-storey Lodge on the Park in Kennedy Road for redevelopment last year. The company is believed to have wanted to build a high-rise tower on the site but is now restricted to keeping the building to its existing height. Gabriel Cheng Hon-wah, a director in investment at property consultants Savills, said developers were now expected to shift their focus to acquiring old buildings in Western, Kennedy Town and Wan Chai, which have no building height restriction yet. Surveyor Albert So Chun-hin expected old buildings in Wan Chai would be welcomed as redevelopment prospects by developers. 'Many of the sites are on old leases which have no development restrictions,' Mr So said. 'But it is definite that the government will impose building height restrictions over Hong Kong.' He said that although there were no limits in these areas yet, developers should be prepared for their imposition. Both Mr Cheng and Mr So said buildings which were below the allowed development plot ratio and were at least 40 years old would be targeted by developers. Prices of flats in buildings that were between 30 and 40 years old at present ranged between HK$4,700 per square foot and HK$5,000 per square foot, said Joan Chow Pui-ying, a sales manager at Centaline Properties. 'Most of the units in this age bracket offer rental yields of 6 per cent, which is attractive to investors,' Ms Chow said. Sam Shum Hing-woo, a deputy sales manager at Centaline, said flats in old buildings in Kennedy Town had become popular in recent years as buyers hoped developers would offer aggressive prices to acquire the buildings for redevelopment. Units of 40-year-old buildings in the area are currently selling at an average price of about HK$3,500 per square foot, according to Centaline. Mr Cheng said developers were willing to offer aggressive prices to buy flats in old buildings which had redevelopment potential. 'Take Merry Terrace as an example. Developers offered HK$19,000 per square foot to acquire units in the building for redevelopment that could fetch only HK$7,000 per square foot on the secondary market,' he said. However, prices expected to be bid by developers for old buildings would now be more conservative since the height restrictions in Mid-Levels were imposed, and developers expected more restrictions elsewhere. 'The taller the new development, the better panoramic view it gets, and the higher the price achievable,' Mr Cheng said. 'Developers won't offer aggressive prices if they cannot build a tall building.' Mr So expected the acquisitions of old buildings in Mid-Levels would slow in the wake of the development restrictions announced last week - an outcome that occurred in Kowloon Tong two years ago. After the market recovery in 2003, developers began aggressively acquiring old buildings in Kowloon Tong. However, the trend stopped abruptly in 2006 when the government imposed building height restrictions in the area. The government has accelerated its programme of imposing development restrictions, and within the past two years most of the high-density districts such as North Point, the Peak and Quarry Bay on Hong Kong Island and in Kowloon have had building height or development plot ratio restrictions imposed to avoid over-development. Kennedy Town, Sai Ying Pun, Sheung Wan and Wan Chai on Hong Kong Island are expected to become the next targets of the planning department. Mr So expected the pace of urban renewal in Hong Kong would slow as more restrictions appear over the next two years. 'In the long term, the government should consider how to accelerate redevelopment in old districts and still retain the character of each district,' he said. 'We should not rely solely on the Urban Renewal Authority.' Districts that have development restrictions Kowloon Tong Ho Man Tin Hung Hom Kowloon Bay Kwun Tong West Kowloon Quarry Bay North Point The Peak Mid-Levels Jardine's Lookout and Wong Nai Chung Stanley Pok Fu Lam Causeway Bay Shouson Hill and Repulse Bay Tai Tam and Shek O
