Concrete Analysis | Costs of acquisition deter redevelopment projects
Private-sector redevelopment projects have declined in the past two years despite the fact that more and more buildings are getting old
In 2011, there were about 4,000 buildings aged 50 years or above in Hong Kong, according to the Development Bureau, with that number set to increase at a rate of 500 each year over the decade.
The design life of a concrete structure is generally 50 years. The expected lifespan of concrete buildings can be substantially extended with proper maintenance. Many of these over 50 years old have no lifts and have substandard sanitary provisions. Quite a number are in imminent need of intensive repairs and maintenance, and a handful demand demolition and rebuild.
The growing number of old buildings does not coincide with a rise in the number of redevelopment projects. Quite the reverse, a declining trend in the number of redevelopments has been observed in the past two years. The number of applications for sale under the Land Compulsory (Sale for Redevelopment) Ordinance (Cap. 545) pending a Lands Tribunal hearing declined from a peak of 60 in 2012 to 17 in 2013 and 25 in 2014.
An adequate economic motive is necessary for private developers to undertake redevelopment projects. But economic factors are acting in a direction that has deterred redevelopment in recent years.
The two major items on the redevelopment expenses list, namely construction costs and acquisition price of strata-titled units in existing buildings, have lifted drastically.
Construction costs increased more than 30 per cent from 2011 to 2014, according to the building works tender price index published by the Architectural Services Department.
What cannot be overlooked is the compound effect of the long holding period of the acquired units, the painstaking site assembly process and the interest costs