"The Masterpiece", a new residential and hotel project being developed by New World Development Ltd and the Hong Kong Urban Renewal Authority, towers above the Tsim Sha Tsui district in Hong Kong. Jerome Favre/Bloomberg News

Govt plan reduces redevelopment of older buildings' trigger level to 80% of owners

New World Development Co, a major developer in the city, extended its support for the government initiative to lower the threshold for compulsory sale of old buildings as it announced a strong turnaround in interim results.

Amid growing claims that soaring property prices have thwarted many residents' dream of having their own home, the government has recently unveiled measures to boost the housing supply in the market, including an initiative to lower the application threshold for compulsory sale of old buildings for redevelopment.

Based on the new initiative, a developer who has acquired at least 80 percent of interest in an old building will be able to apply for a compulsory sale order against owners of the remaining interest.

Currently, developers need to acquire not less than a 90 percent interest in an old building before being allowed to apply for a compulsory sale order from the Lands Tribunal.

"The government should make some effort to speed up the redevelopment process of old buildings," Henry Cheng, managing director of New World Development Wednesday told a press briefing for the company's interim results.

"For the sake of community development, I believe lowering the threshold for compulsory sale will be a positive move," he said.

A lower threshold will help developers acquire 100 percent interest in an old building easier and faster, thereby accelerating the process of redevelopment of old buildings.

Cheng also reiterated his support for the proposal that the government should resume building subsidized flats under the Home Ownership Scheme (HOS) to curb soaring home prices.

Cheng said he sees a further 10 percent rise in property prices this year on top of a 27 percent gain last year due partly to limited home supply in the market.

"For the sake of the public interests, and as an individual citizen, I support the proposal to resume building HOS flats," he said, adding that "of course, as a developer, I do not support the idea".

This put him at odds with other major developers in the city, including Thomas Kwok, vice-chairman of Sun Hung Kai Properties Ltd, the city's largest developer by market value, and Lee Shau-kee, chairman of Henderson Land Development Company Ltd, both of whom have openly expressed their opposition to the idea.

Under the HOS, which has been suspended since 2003, households that cannot afford private-home purchases can buy flats developed by the government at subsidized prices.

Cheng also told reporters Wednesday that he does not see any major impact on property prices from the government's move to sell all remaining subsidized flats.

On Monday, the government said it will sell off over 4,300 remaining subsidized units in the coming months, in order to increase the supply of small- and medium-sized flats in the market.

New World Development reported a net profit of HK$5.35 billion, or HK$1.37 a share, for the first fiscal half ended December 2009, compared with a loss of HK$992 million, or 28 cents, a year earlier.

The strong turnaround was mainly attributable to stronger property sales and higher rental income, as well as a huge revaluation gain on investment properties after the property market staged a sharp rally in the second half of 2009.

Revenue for the period amounted to HK$12.12 billion, basically unchanged from the HK$12.07 billion a year ago.

(HK Edition 03/18/2010 page2)