Mainland Chinese developers take redevelopment route to shore up Hong Kong land bank as they fail to win government tenders

Mainland Chinese builders appear to be shifting their Hong Kong land bank strategy by acquiring old buildings for redevelopment, as fierce competition and Beijing's capital outflow restrictions make it difficult to secure plots in government tenders.
Last year, they submitted 39 compulsory en-bloc sale applications to Hong Kong's Lands Tribunal, up 160 per cent from 2017, according to JLL's Residential Sales Market Monitor released on Tuesday.
"As mainland developers are finding it more difficult to win sites in the government land sales market, compulsory sales have become an increasingly attractive source of land supply," said Henry Mok, senior director of capital markets at JLL.
Chinese developers were able to win just 27 per cent of government land tenders for residential development in 2018 compared to 70 per cent in 2017 despite maintaining a high participation rate in the tenders, he said.
Old buildings in Pei Ho Street, together with those in Hai Tan Street, are being redeveloped. Photo: David Wong
To speed up urban redevelopment, the trigger threshold in the Land (Compulsory Sale for Redevelopment) Ordinance was relaxed in April 2010, allowing developers to force the sale of remaining flats in a building older than 50 years once they had acquired 80 per cent of the units, down from the previous 90 per cent.
Vanke Property (Hong Kong), a wholly-owned unit of China Vanke, was the most active participant, submitting eight applications for compulsory sale last year, JLL said.
Six out of the eight applications submitted by the developer involve a large scale site amalgamation project at 244 to 276 Hai Tan Street, Sham Shui Po. It has paid about HK$1.3 billion (US$165.6 million) for an 80 per cent stake in 18 residential blocks built in 1954.
With a plot ratio of nine times, the 18,745 square feet site could generate a total floor area of 168,700 sq ft once fully developed.
The Urban Renewal Authority is in charge of redeveloping old buildings in Hong Kong. Photo: Edward Wong
"We will look into government land, redevelopment and second-hand land to increase our land bank," said Quincy Chow, vice-president for sales and marketing at Vanke Property.
Vanke won its first individual residential site in Tuen Mun, now developed into Le Pont, for HK$3.8 billion in 2015. It secured another site in Cheung Sha Wan in a tender offered by the Urban Renewal Authority in 2016.
In its interim report, Henderson Land said it has 50 old residential buildings with more than 80 per cent ownership. These account for about 4 million sq ft of gross floor at an average price of HK$8,300 per sq ft.
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