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Hong Kong housing

To Kwa Wan flats could go on sale below market rate in second such scheme under Hong Kong’s Urban Renewal Authority

Quasi-public body says move is to answer city leader’s call for public development agencies to do more amid soaring home prices

PUBLISHED : Tuesday, 19 June, 2018, 8:25pm
UPDATED : Tuesday, 19 June, 2018, 10:57pm

Flats from a housing redevelopment project in Hong Kong’s To Kwa Wan could be sold later this year at prices lower than the market rate in only the second time such a scheme has been put in place by the Urban Renewal Authority.

The comments by the authority on Tuesday came as it recorded a surplus of HK$12 billion (US$1.5 billion) in year 2017-18, the highest since the establishment of the quasi-public body in 2001.

Authority managing director Wai Chi-sing told reporters that its board of directors were still discussing the pricing of the project on Ma Tau Wai Road, which is expected to provide 493 flats for sale around the end of the year.

Urban renewal chief defends costly plan to buy up To Kwa Wan property

Although the prices were expected to be lower than the market rate, Wai said, property owners would be required to contribute regularly to a building maintenance fund, and there would potentially be restrictions on resale.

This is only the second project wholly developed by the authority, giving it more control over price-setting. The other is De Novo in Kai Tak, built in 2016, which provided 338 flats at a 20 per cent discount on market value.

Wai said the current project might serve as a pilot and the authority could adopt this model for future developments, depending on its success and economic viability.

“The authority has mainly been cooperating with private developers in urban renewal projects in the past, so it has less power over pricing,” Wai said. “But the Ma Tau Wai project is developed by us, so we can decide prices on our own.”

He added that the move was also a response to Leung Chun-ying , Hong Kong’s chief executive in 2015, who at the time urged public development bodies to do more to provide affordable housing.

Hong Kong has been consistently ranked the world’s least affordable private property market, with prices rising continuously over the past 25 months as of the end of April.

Amid rapid market inflation, the authority has increasingly paid more to buy buildings for redevelopment. Last month, it offered a record HK$24,000 per square foot to buy properties for a redevelopment project in Sai Ying Pun.

Urban Renewal Authority makes record offer for buildings in Sai Ying Pun

The authority has also long been criticised for selling land acquired in old neighbourhoods to private developers for fat profits, while the developers go on to build luxury estates which are sold at even higher prices, leading to gentrification.

The body enjoys a range of advantages such as compulsory acquisition and exemption from paying the government a hefty sum, known as a premium, to develop a site.

Economist Andy Kwan Cheuk-chiu said the authority should impose income and asset restrictions on the Ma Tau Wai project.

“Even if there are reselling restrictions, high-income people may still want to buy flats in the project because it’s located in a downtown area,” he said. “As a quasi-public organisation, the authority should make sure discounts are not enjoyed by the very rich.”

The authority should make sure discounts are not enjoyed by the very rich
Andy Kwan, economist

Wai said the authority was also studying the redevelopment potential of Yau Ma Tei and Mong Kok, where there are an estimated 3,300 old buildings with a median age of 52 years.

He said preliminary findings showed that the development density in the area could be increased by up to 10 per cent, and part of this extra density could be used for developing affordable housing.

Regarding the highest-ever surplus recorded by the body, Wai said it was mainly due to the unexpectedly high offer – HK$11.6 billion – it received for a site on Graham Street in Central.

But Wai said he believed the surplus marked a peak for the authority as it had switched to a community-based redevelopment model involving larger areas and more buildings, which would require more resources and might even lead to losses.