October 20th, 2010

Say Goodbye to Old Hong Kong

Old buildings bought for redevelopment are displayed in the window of an acquisition company office on Victory Avenue in Ho Man Tin

There goes the neighbourhood. A new government policy on compulsory sales in old buildings has led to a property gold rush in Hong Kong’s older districts, putting homeowners on guard and worrying many that well-established communities will be uprooted and destroyed.

Before April, acquisition companies working for developers had to buy 90 percent of a building’s units before they could force the remaining owners to sell. Now the government has lowered that threshold to 80 percent for buildings more than 50 years old.

The impact can be felt in places like Ho Man Tin, where up to 20 buildings in the few blocks just east of the MTR’s East Rail Line are now targeted for redevelopment. About half are being acquired by Richfield Realty, a company whose controversial acquisition methods include the hanging of large red banners over targeted buildings, a tactic that many homeowners say creates an atmosphere of intimidation.

“We’re very angry and upset to see those banners all over the place — it’s like a cancer that’s spreading throughout the city,” said Kobe Ho, a bookstore manager who lives on Waterloo Road in Ho Man Tin. Some of her friends in the neighbourhood have already been displaced by Richfield’s acquisitions.

“The new legislation has really sped up the process of urban renewal in Hong Kong,” said Wong Ho-yin, a member of the Minority Owners’ Alliance Against Compulsory Sales, which works with homeowners who do not want to leave their homes. “But urban renewal has so many negative effects, in terms of urban planning, social networks and protecting the rights of homeowners. It’s bad enough with the Urban Renewal Authority, but when the private sector gets involved, things are even worse.”

Richfield has been accused of misleading homeowners into signing contracts that allow the company to hold onto flats for years before completing the transaction, without additional compensation. In August, the Estate Agents Authority released a statement that warned acquisition companies against such practices, but Richfield has insisted that it is operating within the authority’s guidelines.

The conflict over redevelopment could soon grow as ever-larger buildings are targeted. Until now, most of the buildings acquired for redevelopment have been walkup tong laus with relatively few owners, but Lee Ho-yin, director of the University of Hong Kong’s architectural conservation programme, said that much larger buildings will be next as more 1960s-era blocks reach 50 years of age.

In Ho Man Tin, Richfield has already started buying units in the 47-year-old Shing Tak Mansion, on Peace Avenue, which has 175 units.

The banners erected on buildings targeted for redevelopment read: “Congratulations to the homeowners who have already received money for selling their flats”

Li Ling-hin, an associate professor in the University of Hong Kong’s Department of Real Estate and Construction, said that redevelopment accounts for up to 50 percent of the city’s supply of new housing units. “In general and in a fair market environment, [the new compulsory sales threshold] is a good thing,” he said.

But the market is not always fair. “It is not a good sign that all redevelopment projects these days are packaged as luxurious housing projects,” he said, which has the effect of replacing inexpensive older flats with pricier ones that appeal mainly to property investors.

There is also the issue of the acquisition process itself, which a growing number of homeowners and housing advocates have criticized as flawed. “The whole process lacks transparency and regulation,” said Wong, who is working with homeowners in Ho Man Tin and other neighbourhood who feel they are being bullied into selling their flats.

“Because the whole process of acquisition is so long, it creates a lot of uncertainly and pressure for residents to sell, not to mention a very unpleasant living environment,” he said. Even if a majority of residents want to stay put, he said, the resources and perseverance of acquisition companies eventually wears them down. “Once the banners go up, people get scared,” said Susanna Poon, a property broker on Peace Avenue.

Concerns about the structural integrity of old buildings also plays into the pressure to sell. After last January’s building collapse in Hung Hom, Richfield began displaying photos of cracked concrete in some of its shopfront acquisition offices. Earlier this year, several Tai Kok Tsui residents said they received an anonymous letter warning that their building could collapse; a few days later, Richfield approached them with an offer to buy their flats.

But many of the problems are cosmetic rather than structural. When the government conducted a survey of 2,933 buildings after the Hung Hom collapse, it found that 77 percent needed no repairs at all.

In fact, said Charmaine Tso, a property specialist who has studied the renovation of tong laus in areas like Soho, the lowered threshold for compulsory sales might actually prevent more buildings from being renovated, since it creates extra incentive for property owners to wait until old buildings are redeveloped rather than rehabilitate them.

Earlier this year, less than six months after their building was renovated under the government’s Building Bright scheme, the owners of the Matauwei Apartments in Hung Hong sold their properties to Richfield. Some cited concerns about a possible collapse as their reason for selling.

Wong said that the acquisition process itself might actually contribute to the decay of old buildings. When acquisition companies buy a flat, they often open all the windows, which lets in rainwater and leads to water damage. As more flats are acquired, the building’s owners’ corporation collapses, which leads to cutbacks in maintenance.

Even more worryingly, many homeowners complain that their buildings suffer from mysterious episodes of vandalism after acquisition companies move in: broken pipes, damaged electrical wiring, sudden cockroach infestations and even feces left in hallways. “It can’t be a coincidence, but it’s very difficult to prove that an acquisition company is responsible,” he said.

When homeowners finally do sell their properties, they often find that their compensation is not enough to buy another flat in the same neighbourhood. That’s especially true in Ho Man Tin, where property brokers say that the acquisition drive is pushing up prices.

A sign of the future could be One Victory, a new residential tower currently being built on Victory Avenue. It recently went on the market at HK$10,000 per square foot. Units range in size from 350 to 1301 square feet, but only 62 percent of that space is listed as usable. According to Wong, most homeowners whose properties are being acquired by Richfield are being paid less than HK$7,000 per square foot.

Until now, Ho Man Tin has been an exceptionally stable neighbourhood, with 72 percent of residents living at the same address as five years ago, compared to 58 percent in the city as a whole. “If everything is replaced by buildings like Victory One, the community will be destroyed,” said Kobe Ho. “People are being thrown out. You will no longer see any more small businesses.”

Half a dozen businesses on Victory Avenue have closed since April. The next to go might be Kei Heung Bing Sutt, a popular gathering spot that has served milk tea and macaroni soup for 38 years. Richfield has bought more than 80 percent of the units in its 52-year-old building.

“I’ve seen my customers grow up and come back with their own children,” said the café’s owner, Kwan Kin-ming. “If they want to demolish this building, we might have to leave very soon. What can I do?”

Small shops such as these will disappear when their buildings are redeveloped. New buildings built in Ho Man Tin often have parking garage entrances and no retail space at ground level

Most of the older buildings on Soares Avenue (top) and Victory Avenue (bottom) are now being acquired for redevelopment

Richfield’s response

Richfield Realty has hit back at claims it is using underhand tactics to pressure tenants in old buildings to sell up.

Company project manager Elwyn Chan Chi-ling said the aim of the red banners was to make the acquisition more transparent to, for example, potential vendors not living in the building.

“Of course, the banners might create an uncomfortable feeling for those who were unwilling to sell. But, do you think we could erect them on the premises without the authority of or a permit from the majority owners?” Chan said. He said the company had never had a complaint about an unfair agreement or contract from a homeowner who was selling.

Chan also strongly denied that vandalism of any sort was taking place or that windows were left open in vacated apartments leading to water damage.

On allegations over Tai Kok Tsui building safety, Chan said: “We believe the MTR would have given adequate consideration to building safety before they decided and fixed the alignment of Tai Kok Tsui.”

Chan added: “Richfield’s mission is to create a ‘triple-win’ environment to assist those vendors of ageing buildings to achieve a better living standard … At the same time, society can benefit from urban renewal.”


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