Hong Kong’s biggest building bonus comes with a catch

Developers are expected to favour sites of at least 700 square metres.

Hong Kong’s 20% bonus plot ratio for redeveloping ageing residential buildings could deliver the greatest financial benefit in districts where fragmented ownership makes projects hardest to complete, property analysts said.

“I would see this as a targeted accelerator rather than a wholesale reset of urban renewal,” Jack Tong, director of research and consultancy at Savills Hong Kong, said in an emailed reply to questions.

He said the program could bring forward projects delayed by insufficient returns but would not resolve difficulties in securing agreement amongst property owners.

The standard bonus rate is $84,000 per square metre in Wan Chai and Sai Ying Pun–Sheung Wan, compared with $70,000 in Mong Kok and Yau Ma Tei and $46,000 in Tsuen Wan.

An additional 1,000 square metres of floor area would be worth $84m on Hong Kong Island, against $46m in Tsuen Wan, an 83% difference.

Tong said small lots, fragmented ownership, mixed-use buildings, and heritage restrictions could limit redevelopment on Hong Kong Island despite its higher incentive.

He expects Mong Kok and Yau Ma Tei to generate the most projects, with Ma Tau Kok and Cheung Sha Wan also offering opportunities.

KB Wong, executive director and head of valuation and advisory services at Cushman & Wakefield Hong Kong, said Sai Ying Pun, Sheung Wan, and Wan Chai could generate the highest value from the incentive.

“That credit can offset land premiums on other eligible deals, including government land sales, lease modifications and land exchanges in the Northern Metropolis,” Wong said in an emailed response.

Tong said developers would benefit from the credit only if they had a clear use for it. He expects a more moderate response in Tsuen Wan because of its lower bonus value.

“The biggest issue remains ownership assembly,” he said, noting that higher project returns would not compel owners to agree on selling prices.

Wong said Hong Kong’s stock of buildings aged 50 and above is projected to increase by more than 700 annually over the next 15 years.

He said prices of eligible buildings could rise, although the program is not meant to increase property values.

Both analysts expect developers to target sites of at least 700 square metres or adjoining buildings that can meet the threshold.

Tong said weak property sales, high borrowing costs, and rising construction expenses could still delay acquisitions.