2025-03-25 28Hse Editor
Last week, Lee Shau-kee, founder of Henderson Land Development, passed away at the age of 97. Henderson Land is one of Hong Kong’s four major property developers and is well-known for its expertise in acquiring and redeveloping old buildings. However, many of its redevelopment projects involve relatively small sites, which are often rebuilt into single-tower developments with compact nano flats. One example is One Prestige in North Point, completed in 2018, where 98% of the 128 units are studio apartments.
Henderson has long collaborated with Richfield Group Holdings on old building acquisitions. According to available information, between 2005 and 2021, Richfield acquired old buildings across various districts worth nearly HK$100 billion, which were later sold to Henderson for redevelopment into new projects.
Old building acquisitions are often seen as a lucrative opportunity, with some people even buying old flats in hopes of profiting from future redevelopment. But how does the process work? To boost housing supply, the Urban Renewal Authority (URA) or private developers purchase old buildings, demolish them—particularly those with low utilisation or structural issues—and replace them with taller residential towers, or in some cases, commercial developments.
Once the URA or developers acquire a specific percentage of ownership in a building, they can apply to the Lands Tribunal for a compulsory sale to acquire the remaining units that have not yet been sold. The threshold for compulsory sale varies depending on the age of the building and its location.
Under the government’s latest regulations, for buildings aged between 50 and 59 years in seven districts with urgent redevelopment needs—Sheung Wan and Sai Ying Pun, Wan Chai, Mong Kok, Yau Ma Tei, Ma Tau Kok, Cheung Sha Wan, and Tsuen Wan—the compulsory sale threshold has been lowered to 70%. For buildings aged 60 to 69 years in these designated areas, the threshold is 65%. For non-designated areas, the threshold remains at 70%.
Both the URA and private developers can acquire old buildings, but do the acquisition prices differ? Which offers a better deal? When the URA acquires residential properties owned by self-occupying owners, it not only pays the full market value of the property but also provides an additional Home Purchase Allowance. This allowance is calculated based on the price of a seven-year-old flat in the same district, helping owners purchase a new home.
For owners who no longer live in their property and leave it vacant, the URA pays the property’s full market value along with an Ex-Gratia Allowance. The Ex-Gratia Allowance typically ranges from 25% to 75% of the Home Purchase Allowance, depending on factors such as the owner’s number of properties and the occupancy status of the unit.
When it comes to acquisitions by private developers, the process is less transparent. Even for units of the same size and layout, the purchase price may vary significantly. Much like buying and selling second-hand properties, the final acquisition price depends on negotiations between the owner and the developer. Factors such as the unit’s value and the developer’s overall budget for the project come into play. This means some owners may sell at a high price, some at a lower price, and others may fail to reach an agreement if their asking price is deemed too high.
Compared to private developers, the URA’s acquisition offers are typically more straightforward and come with additional compensation, making the process simpler and more transparent. In contrast, offers from private developers can vary significantly, requiring owners to carefully assess the value of their property to determine if the offer is reasonable.
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