Developers use forced auctions to snap up Hong Kong’s older buildings for redevelopment amid city’s land shortage
- Some developers who have already acquired at least 80 per cent of an old building are using compulsory purchase orders to take full ownership and renovate them into new flats
- Analysts see a spike in such purchases in the coming months as the courts reopen after being halted during coronavirus
Some of Hong Kong’s ageing residential buildings are being snapped up for redevelopment through compulsory purchase orders amid a shortage of land in the city.
Billionaire Edwin Leong’s Tai Hung Fai Enterprise bought a 61-year old building in Sai Ying Pun while Hip Shing Hong acquired another old building in Shau Kei Wan on Wednesday.
Both buildings were worth HK$700 million (US$90.32 million) and were bought under the Land (Compulsory Sale for Redevelopment) Ordinance. The law enables developers to force a compulsory auction to buy the remaining stake of a building, if it is over 50 years old and they already owns 80 per cent.
The number of such forced sales will rise in the coming months as courts resume operations after closing during the coronavirus outbreak, said Alnwick Chan, executive director and head of valuation and professional services at Knight Frank, which is helping with applications for three compulsory sales in the next three months.
The compulsory auction for the On Hing Building in Sai Ying Pun, about 10 minutes’ walk from the University of Hong Kong, had a reserve price of HK$700 million. The company has spent years acquiring 91 per cent ownership of the nine-storey commercial and residential building.
Tai Hung Fai pushed ahead with the project despite the gloomy state of the property market because “construction takes several years”, and therefore things should have improved by the time redevelopment is complete, said Edwin Leong, founder and chairman of the developer.
