The URA has always used the "seven-year-old" acquisition and compensation mechanism, that is, when setting the purchase price, it will refer to the price per square foot of seven-year-old buildings in the same district.
URA Executive Director Wei Zhicheng published a blog today (7th), pointing out that in the face of the extremely large-scale urban aging problem and the economic environment where property prices are still at a high level, the current compensation mechanism is no longer sustainable. Time to seek alternative innovations.
Taking Yau Mong District as an example, Wei Zhicheng pointed out that if the URA continued to use the current acquisition and compensation mechanism, the acquisition expenditure involved would exceed $700 billion. Based on the URA’s current total assets of about $50 billion, it would be necessary to separate multiple It will take up to 100 years to complete the renewal work of the whole district, and it will face a loss of 100 billion yuan after reconstruction.
Wei Zhicheng, Executive Director of the URA, said that if the current acquisition compensation mechanism that is higher than the market price is continued, the huge expenditure involved will still far exceed the range that the society can bear.
(File photo/Photo by Luo Junhao)
New planning tools improve financial returns, but compensation mechanisms far exceed social commitments
Wei Zhicheng said that the remaining buildable floor area in the old area is small and there is no incentive for redevelopment. Even if the URA uses existing and new planning tools to increase the development area, including increasing the height of the building or transferring the plot ratio, it cannot continue to increase the old area. District density, describing the increase in density as a "one-time measure" that cannot be abused.
Therefore, he is very grateful for the cooperation of the government. In the redevelopment projects carried out in Sham Shui Po and Kowloon City in recent years, the government supports the inclusion of inefficient and unused streets and government facilities around the project into the redevelopment scope.
The associated land does not require acquisition costs, increasing the total land area available for development.
In addition, the URA has also piloted new planning tools in different old districts, including using plot ratio transfer to transfer unused plot ratios from areas with low development potential to areas with high development potential, so as to enhance the redevelopment efficiency.
However, Wei Zhicheng emphasized that even if the new planning tools can improve financial returns, if the current acquisition compensation mechanism that is higher than the market price is continued, the huge expenditure involved is still far beyond the range that the society can bear.
▼Five development nodes of Youwang Research▼
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Oil Wang update takes up to 100 years to complete
Wei Zhicheng explained that, taking Yau Mong District as an example, although Yau Mong Research recommends adopting the “positive” scheme as the starting point of the renewal strategy, among the approximately 3,000 buildings proposed for redevelopment, only 40% of the buildings will be redeveloped after increasing the redevelopment density. It will be profitable and will attract the private market to intervene in reconstruction.
As for the remaining 60% of the buildings, since the remaining plot ratios are very low, even after increasing the density, there is still no financial incentive to attract market participation, so they can only be implemented by the URA.
Wei pointed out that if the URA continues to use the current “seven-year building” acquisition and compensation mechanism, the expenditure on acquisitions will exceed $700 billion. Considering that the URA now has only about $50 billion in total assets, it will have to be divided into multiple cycles. After the completion of the renewal of Yauwang, the renewal work of the whole area will take up to 100 years to complete, and it will face a loss of 100 billion yuan after the reconstruction.
Wei Zhicheng mentioned that Huang Yuanshan, director of the URA and member of the Legislative Council, recently published an article, hoping that the government can allocate part of the land for the relocation of urban renewal in future large-scale land development projects, as a way to speed up the reconstruction of old districts and support old districts. It is an important measure for district renewal, which he personally agrees with.
He reiterated that in the face of the extremely large-scale urban aging problem and the economic environment where property prices are still at a high level, the current compensation mechanism is no longer sustainable.
Wei Zhicheng pointed out that it is not feasible for the URA to develop public housing and rebuild the civil servants' cooperative to provide 1,000 units of first homes for the redevelopment of 13th Street, To Kwa Wan?
URA: The acquisition requires 40 billion yuan, and it is necessary to save enough money first. The URA has a surplus of 6.57 billion, and the URA earns 1.3 billion in happiness. The gap will reach 15 billion yuan to be financed
