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Urban renewal: A strategic priority for making Asian cities fit for the future

Colliers APAC blog - Urban Renewal

Major Asian cities are at various stages of their renewal journeys, as they work to overcome the challenge of urban decay.


Urban decay is a burning challenge for many cities in Asia as they strive to reposition and remain competitive in a post-covid world. Major Asian cities are at various stages of their renewal journeys. Public bodies, such as Urban Renewal Authority (URA) in Hong Kong, are set up to regenerate rundown buildings.

But the question remains - is it an achievable mandate for statutory bodies like the URA to undertake and facilitate urban renewal at the required speed? Redevelopment of buildings aging over the past 50-80 years solely by statutory bodies like the URA is certainly not possible.

Hong Kong

PrivateSectorParticipationinUrbanRenewalHK2

Consider this: Hong Kong has 600 buildings reaching 50 years of age every year. Built out of reinforced concrete during the 1950s, these tenement buildings seen across Hong Kong Island and Kowloon Peninsula were set up to provide habitation for locals and refugees from mainland China after the Second World War.

Individual units in these buildings were sold to different owners. Today, whilst proper maintenance can extend the life of these old buildings and reduce the safety hazards for occupiers and the public, the high maintenance costs pose difficult problems to the individual owners. Redevelopment of these aged buildings is the only long-term solution to improve the built environment and rejuvenate the city.

TenementbuildingsinKowloonCityofHongKongTenement buildings in Kowloon City of Hong Kong
Source: Urban Renewal Authority  

Hong Kong’s Urban Renewal Authority (URA), a self-financed statutory body, undertakes, promotes, and facilitates urban renewal. To address urban decay, legislation was promulgated to facilitate owners of private buildings in multiple ownership to redevelop their lots. The Land (Compulsory Sale for Redevelopment) Ordinance came into operation in 1999. Once a developer secures more than 90% shareholding of an old building on a lot, it can apply to the Lands Tribunal for a compulsory sale in accordance with the Ordinance. 

As per the prevailing policy, the applicant for compulsory sale must be able to demonstrate that the subject building is in a state of repair justifying redevelopment.

Singapore

PrivateSectorParticipationinUrbanRenewalSG

Collective Sales is a policy that is supported by law in Singapore, and the entire process is administered under the Land Title (Strata) Act. In the face of Singapore's scarce land resource, the Act stimulates private sector led redevelopment in Singapore. A collective sale involves a majority consent, instead of unanimous consent, among the owners to sell the entire stratified development.

The Act was amended in 1999. For developments less than 10 years old, owners’ consent of at least 90% by share value and strata area is required. For developments of 10 years and older, owners’ consent of at least 80% by share value and strata area is required. From the perspective of the requirements on building age and maintenance state, the criteria for qualifying a collective sale seem to be less stringent in Singapore.

Still, financial compensations need to be high enough to induce sufficient owners’ consent. The collective sales market in Singapore has been highly active. Sales are perceived to be the other major means for developers to replenish land banks apart from the Government Land Sales.

Taipei

PrivateSectorParticipationinUrbanRenewalTW

Under the Urban Renewal Act in Taiwan, redevelopment is motivated with bulk building and tax incentives, along with relaxed financing restrictions. However, the Act cannot force anyone to sell their property against their will. A small minority, or even a single individual might refuse to sell, thereby holding back the neighbourhood from redevelopment.

With a view to expedite the reconstruction of unsafe and old buildings within the area of urban planning, and to improve the living environment and building safety for citizens against potential disaster risks, the Statute for Expediting Reconstruction of Urban Unsafe and Old Buildings was enacted in 2017 in Taiwan.

A developer may apply for reconstruction of buildings and redevelopment of land in accordance with this Statute. The developer shall formulate a reconstruction plan, gain consent from owners of all land and legal buildings within the scope of the reconstruction plan, gain approval from the government, and apply for a building permit in accordance with building laws and regulations. The deadline for application for the reconstruction plan is 31 May 2027. To promote private sector participation, the government may provide bonus building base bulk for the redevelopment, subsidies for structural safety assessment fees and tax exemption or reduction.

There were 2,459 such applications across cities in Taiwan in 2021, of which 1951 were approved. The robust growth in the number of applications and approvals in recent years indicates the positive impact of the new initiatives. Around 1,112 applications were approved in 2020, some 313 in 2019 and 72 in 2018. In 2020 and 2021, some well-known hotels in Taipei City have made use of this statue, taking advantage of their single-ownership and low occupancy rates during the pandemic, to make applications for reconstruction of the hotels to other uses. 

Key considerations

Lower application threshold

New legislative provisions have been in force in Hong Kong since April 2010 to allow a lower threshold for the application for sale of three classes of lots under the Land (Compulsory Sale for Redevelopment) Ordinance. To further facilitate the redevelopment of dilapidated buildings, the application threshold was lowered to 80% for lots with all buildings aged 50 years or above. 

The new initiative had an immediate effect. The number of applications increased significantly from 8 in 2009 to 21 in 2010, 46 in 2011 and 57 in 2012.

As time goes by, there are fewer old buildings left with potentially higher redevelopment value. Many of the existing old buildings are high-rise buildings or even housing developments whose plot ratios have been used up or nearly used up. The former Chief Executive Mrs. Carrie Lam had announced in her 2021 Policy Address that the Government would start a review of lowering the application threshold to expedite redevelopment of aged buildings. According to the Secretary for Development in August 2022, the new proposals on the amendments of the Ordinance will be put forward to the Legislative Council for discussion at the end of this year.

Encourage Private Sector Participation

To tackle the urban decay problems, the private sector’s effort could be better made use of by introducing measures to expedite site assembly process by developers.

The initiatives in Taipei show that allowing development density increase provides good financial incentives to developers for undertaking redevelopment and for individual owners to receive sufficient funds for finding better quality replacement flats. Facilitating the individual owners to receive valuation and legal professional advice at an early stage in the site assembly process is also key to accelerating the process.

Very often, individual owners delay their disposal decisions as they do not understand the causal effect of the redevelopment potential on the value of their assets. A balance must be struck between the protection of property rights of the individual owners and the facilitation of redevelopment of dilapidated buildings. 

 

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Related Experts
Hong Kong SAR China

Dorothy Chow

Executive Director | Asia

Valuation & Advisory Services

Hong Kong

Dorothy is a qualified general practice surveyor.  She has over 24 years'  experience specializing in valuation, land matters and property development.  She has solid experience on valuation and advisory matters including:

  • Portfolio asset valuation
  • Valuation for litigation
  • Valuation for compulsory sale of land for redevelopment 
  • Valuation for rent review
  • Rates, tax and stamp duty negotiation with the Government
  • Land and development matters
  • Development consultancy to public bodies and corporates

In her career, Dorothy  has developed strong relationships with numerous developers, investors, and institutional clients,  She has particular experience in providing support to legal actions and rent reviews.

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