2022 Compulsory sale applications 24% below past three-year average
Only two compulsory sale applications received in the first quarter of 2023
HONG KONG, April 11, 2023 – The number of compulsory sale applications in 2022 was 24% less than the average number of applications between 2019 and 2021, according to JLL's latest Residential Market Monitor released today.
Accounting for more than half of estimated units from private housing land supply in the financial year of 2023, private development/ redevelopment projects have been an important source of housing supply, especially in urban locations. However, despite a growing number of aged and dilapidated buildings, the pace of redevelopment through compulsory sales has slowed. The Lands Tribunal received 22 applications for compulsory sale last year, compared to an average of 29 cases recorded from 2019 to 2021.
Norry Lee, Senior Director of Projects Strategy and Consultancy Department at JLL in Hong Kong, said: "The market downturn and looming uncertainties have weakened developers’ confidence and risk appetite and thus delayed the acquisition process. Even for those still actively seeking redevelopment opportunities, the expectation of lower acquisition costs due to falling home prices also prompted pauses.”
Meanwhile, property owners of aged buildings, primarily elderly people who are reluctant to relocate in the first place, became less willing to accept lower-priced offers. Many would rather hold on to their properties until the market turns buoyant again. As a result, it has been increasingly challenging to conclude acquisitions.
Moreover, sites with extra Gross Floor Area potential were acquired and redeveloped over decades and became rarer in the current market. Lee said: “To speed up the redevelopment process and boost the private housing supply, the government must find new ways to incentivise redevelopment to align private and public interests.”
As announced in the 2022 policy address, the government proposed initiatives to speed up the compulsory sales process. The relaxation of the threshold and more flexibility for compulsory sale applications will benefit ongoing acquisitions. However, before the proposed changes are finalised, developers will likely take a wait-and-see approach. Year-to-March, only two compulsory sales applications were submitted.
Nelson Wong, Executive Director of Research at JLL in Hong Kong, said: "We expect compulsory sales applications will return more visibly in the second half of this year as compulsory sales regulations are formally relaxed and market sentiment stabilises."
Source: The Land Tribunal, Development Bureau, JLL
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