HONG KONG’S property developers are looking to transform run-down buildings into profit generators in the world’s most expensive real estate market.
According to Bloomberg, the developers are increasingly acquiring and revamping old buildings as land gets more expensive.
Government figures show that 2018 saw a six-year high for the number of applications for compulsory sales, allowing developers to gain full control of an apartment block after securing 80 percent ownership.
“A red-hot government land sales market in 2017 and early 2018 and large plots on offer — which translates into bigger lump-sum investments — effectively shut out a lot of small-to-medium-sized developers,” said Denis Ma, head of research at Jones Lang LaSalle Inc, was quoted as saying.
Hong Kong’s surging property prices have created a rising demand for nano flats, small apartment units below 180 square feet, which is equivalent 1.5 times of a standard car parking space.
Over the last decade, Hong Kong’s property development has been booming.
However, the residential market has shown signs of cooling in the last quarter due to economic factors.
He said the companies were breathing new life into old buildings to sustain their development pipelines.
Reed Hatcher, head of research at Cushman & Wakefield Plc, said transforming the buildings was also another way to address the scarcity of land in the island-city.
Hong Kong’s recent property boom between 2017 and mid-2019 saw land at government tenders being sold at astronomical prices.
In May, Sun Hung Kai Properties Ltd paid an unprecedented US$3.2 billion for a residential site near the city’s former airport, almost one-and-a-half times the previous record set in Nov 2017, according to Bloomberg.