Hong Kong property

Mainland Chinese developers eye Hong Kong’s ageing residential blocks for redevelopment

As home prices soften, mainland developers have become more active in acquiring old buildings

PUBLISHED : Thursday, 18 October, 2018, 9:03am
UPDATED : Thursday, 18 October, 2018, 11:35am

A wave of mainland Chinese firms have started hunting for old buildings in Hong Kong’s urban areas, in a bid to acquire cheap land for redevelopment in the world’s most expensive property market.

As of October 4, there were 25 applications submitted by developers for compulsory en-bloc sale, according to data from the Lands Tribunal.

The figure is 60 per cent more than the 11 cases in 2016, and 47 per cent higher than 17 cases filed in 2015.

“The surge is partly driven by the entrance of mainland developers,” said Alnwich Chan, executive director and head of valuation and professional services at Knight Frank.

The trigger threshold in the ordinance was relaxed in April 2010 such that developers can force the sale of remaining flats in a building older than 50 years once they had acquired 80 per cent of the units. This was down from the previous 90 per cent threshold.

As home prices soften, mainland developers have become more active in acquiring old buildings.

Homeowners, developers rush to cash in before further price falls

Agile Group Holdings, one of the most aggressive mainland developers in securing redevelopment opportunities, paid HK$800 million (US$102 million) for 30 flats, or an 80 per cent stake in the 44-unit Dragon Court at 6 Eastbourne Road, Beacon Hill, Kowloon Tong. It also bought five flats in nearby Hamburg Villa at 8-10 Eastbourne Road, for HK$73 million. Hamburg Villa has 33 units.

The developer could combine the two sites and redevelop the two ageing residential blocks into a luxury housing project.

In a similar move, Country Garden Holdings paid HK$610 million for the whole building at 142 to 154 Carpenter Road, Kowloon City.

Meanwhile, China Aoyuan Property Group bought five units at the 51-year-old Yin Yee Mansion in Mid-Levels West for HK$131 million in March.

“Developers will speed up the acquisitions during a softening market,” said Dorothy Chow, regional director of Valuation at JLL in Hong Kong.

On Tuesday, the Lands Department announced it had withdrawn the sale of a luxury residential site on The Peak as all offers were below the government’s reserve price.

Hong Kong scraps sale of The Peak plot as bids failed to meet target

“Redeveloping old buildings should be considered the cheapest way for land replenishment,” said Victor Lai Kin-fai, a managing director at Centaline Surveyors.

He added that Henderson Land was the most aggressive in acquiring old buildings in prime locations.

The property heavyweight has spent HK$37.83 billion to acquire 49 urban redevelopment projects with entire or more than 80 per cent ownership, translating into a land cost of about HK$8,600 per square foot.

Lai cautioned that the land assembly approach often requires a lengthy process in contacting the owners of flats in old buildings.