Hong Kong’s older buildings are in for a revamp.
Hong Kong is witnessing growing interest from Chinese developers in acquiring older buildings for redevelopment as compulsory sale applications surged 160% YoY to 39 applications received by the Lands Tribunal in 2018, according to JLL’s latest Residential Sales Market Monitor.
Meanwhile, local developers remained active in the market with Henderson Land submitting 7 applications during the year, JLL noted.
“The rising interest of Chinese developers on compulsory sales can be partly attributed to their growing familiarity with the Hong Kong property market and comfort in pursuing more complex investment opportunities,” Denis Ma, head of research at JLL, said in a statement. Coupled with the lack of development sites sold in urban areas by the government over the past few years, site amalgamation is viewed as being an effective means to acquire land; especially smaller plots in prime locations.
After being absent in 2017, developers from mainland China refocused on older properties as a source of land supply with Vanke Property submitting a total of 8 applications, including a large scale site amalgamation project at Hai Tan Street in Sham Shui Po.
“Compared to government land sales, the process in acquiring development sites through compulsory sales is more lengthy and complicated. In some cases, it may even incur higher upfront costs and risks. Yet with PRC developers finding it more difficult to win sites in the government land sale market, compulsory sales have become an increasingly attractive source of land supply,” Henry Mok, senior director of Capital Markets at JLL, said in a statement.
Figures from JLL showed that Chinese developers won 27% of government land tenders for residential development sites in 2018 compared to 70% in 2017 even as they maintained a high participation rate in tenders.
“Looking ahead, we expect applications for compulsory sales to continue to rise owing to the limited supply of urban development sites in government’s land sale programme over the foreseeable future,” Ma added.
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