The imposition of extra stamp duties, which caused a 72 per cent drop last year in developers' purchases of old buildings for redevelopment, will continue to affect the sector this year, property consultants say. Acquiring old buildings has been one of the ways developers have replenished their land banks over the past four years. Information from the Lands Tribunal shows applications to trigger auctions of old buildings dropped to just 17 last year, compared with 61 in 2012. Under the Land [Compulsory Sales for Redevelopment] Ordinance, developers are able to force a compulsory land auction to acquire complete ownership of a building if they already own 80 per cent of it. Alnwick Chan Chi-hing, head of valuation and professional services at real estate consultancy Knight Frank, said: "I think the applications for compulsory sale will drop a further 30 per cent this year." He expects the firm's business in the sector to decline. Chan blames the drop on the extra stamp duties. Although one of the measures was only approved by lawmakers last month, and other is awaiting their approval, both duties have been levied since they were announced. In October 2012 the government began levying an additional 15 per cent stamp duty on purchases by corporate and non-permanent-resident buyers. Last year it doubled regular stamp duties for buyers of all properties worth HK$2 million or more, to up to 8.5 per cent. Both measures increased costs for developers buying flats in old buildings. Chan said. "Developers have had to reduce their offers to flat owners" so as to lower the cost of acquisition, Chan said, but flat owners wouldn't accept the lower prices. Developers can get a refund of the 15 per cent extra duty if they are able to redevelop the building and obtain an occupation permit within six years. "Many projects take more than six years for redevelopment," Chan said. "For example, Swire Properties took more than 10 years to acquire the ownership of old buildings and redevelop them into Three Pacific Place in Admiralty." Chan said the government should allow developers more time to finish redevelopments. "Many developers are still interested in acquiring old buildings but stamp duties have scared them away," he said. Many developers are still interested in acquiring old buildings, but stamp duties scared them away Alnwick Chan, Knight Frank Charles Chan Chiu-kwok, managing director at Savills Valuation and Professional Services, believes applications for acquisition will drop 20 to 30 per cent this year. "Our market share in this sector is about 70 per cent to 80 per cent. Our business from the sector will also decrease 20 to 30 per cent," he said. Richfield, a property agent and developer that focuses on acquiring old buildings, recorded a net loss of HK$195 million for the year to June last year. That compared with a net profit of HK$29.85 million a year earlier. The company blamed the result on the decline in the number of completed acquisitions. Developers also face uncertainty in redeveloping old buildings because of a court decision in a lawsuit over a Kowloon City site in May, Charles Chan said. The Court of Final Appeal ruled that a high-rise building is not a house. That means that developers may need to pay a land premium to build a high-rise building on a site with a land-lease restriction requiring that "not more than one house" be built on the land. Charles Chan said developers were waiting for the Lands Department to issue practice notes on the details for the calculation of land premiums. He said developers had turned their interest to government land sales. "Developers prefer to buy government land instead of buying old buildings for redevelopment because they can start building on the land in a short period of time. It is difficult for them to get a development site by buying up all the flats in old buildings," he said. Moreover, there were fewer old buildings available for acquisition because so many had been sold in recent years, he added. Analysts said the slowdown in redevelopment projects would not affect land supply because most of the redevelopment projects were small-scale.