Hong Kong property

Mid-Levels unlikely to see rush to develop

Bad roads and traffic jams pose deterrent, while most land in Pok Fu Lam is not in private hands

PUBLISHED : Wednesday, 23 January, 2013, 12:00am
UPDATED : Wednesday, 23 January, 2013, 4:47am

News that the government might lift restrictions on property development in Pok Fu Lam and Mid-Levels has drawn a lukewarm response from landlords and buyers, according to industry players.

"We haven't seen any immediate market response so far, maybe because there aren't a lot of private properties available for redevelopment in Pok Fu Lam," said Raymond Li Ngai, senior sales director at Centaline Property Agency.

Chief Executive Leung Chun-ying announced in his maiden policy address last week that the government would consider relaxing or lifting moratoriums currently in force to restrict the sale of new land or modification to leases in Pok Fu Lam and Mid-Levels. The move would be aimed at lifting existing development restrictions in these two areas and thus boosting land supply.

Introduced by the government in the 1970s, the moratoriums prohibit new land sales or redevelopment of buildings into larger projects without the Executive Council's approval. The purpose of the restrictions was to limit the growth of traffic in these two areas.

A government source explained the relaxation now being considered would mainly target further developments in Pok Fu Lam, as the government itself owns sites near Wah Fu Estate and Chi Fu Fa Yuen.

Li said Hang Lung Properties' project at the Ebenezer School & Home for the Visually Impaired in Pok Fu Lam Road, as well as Pokfulam Mansion and Yue Yan Mansion, could be redeveloped into projects with higher plot ratios.

"Land sites in Pok Fu Lam are held mainly by the government, the University of Hong Kong and Queen Mary Hospital. Not many are privately owned," he said. This could explain the tepid public reaction to the news of the possible relaxation of existing restrictions.

Another obstacle which may deter landlords from seeking to redevelop their properties into larger projects in the area is the high land premium they would need to pay in the event they won approval for the redevelopments.

"[The government] is trying to lift the plot ratio for those areas, but still the extra plot ratio is not for free," developer Tai Hung Fai Enterprise's chairman Edwin Leong Siu-hung said. However, the government is now "very cautious and sensitive" hence it will ask developers to pay a "phenomenal amount" in land premiums if they want to get additional floor areas, to avoid a public outcry about colluding with developers.

Charles Chan Chiu-kwok, managing director of property consultancy firm Savills Valuation and Professional Services, pointed out that it could take as long as two to three years for developers and the government to negotiate a land premium for redevelopment projects in Pok Fu Lam.

He also said it would be difficult to see further property development in Mid-Levels, given that the roads and traffic situation had not seen much improvement in the past few decades.

Li of Centaline said that the bad traffic situation could affect home prices.

Patrick Fung, a sales director at Midland Realty, said it was difficult to predict the impact the latest policy proposal might have on home prices, since the government has only just started studying the proposal and it would then take another few years for any new developments to be launched on the market.

Residents in Mid-Levels are worried about the possibility of increasing rents.