LCQ12: Compensation for owners affected by redevelopment projects of the Urban Renewal Authority

Following is a question by the Hon Shiu Ka-chun and a written reply by the Secretary for Development, Mr Eric Ma, in the Legislative Council today (June 7):

Question:

According to the Land Resumption and Compensation in the Urban Area - Guidelines for Owners, Occupiers and Surveyors (LandsD Guidelines) issued by the Lands Department, in addition to statutory compensation, owner-occupiers affected by the Government's land resumption exercises may also receive the Home Purchase Allowance (HPA).  The amount of HPA payable to individual owners is the difference between the value of a notional replacement flat (based on a seven-year-old flat of a size similar to the resumed flat and in the same locality) and the open market value of the resumed flat. On the other hand, the Urban Renewal Authority (URA) adopts a similar principle in offering HPA to owner-occupiers affected by its redevelopment projects and has drawn up valuation guidelines with reference to the LandsD Guidelines.  According to the valuation guidelines, URA engages surveyors to collect and analyse information on property transactions in the same locality as the redevelopment project, in order to work out the price per square foot for the notional seven-year-old replacement flat (commonly known as "the price per square foot for a seven-year-old flat"). In this connection, will the Government inform this Council:
 
(1) whether it knows the following information about each of the redevelopment projects undertaken by URA in the past 10 years (to be set out in a table): (i) the name of the project, (ii) the announcement date, (iii) the number of residential flats involved, (iv) the number of residential flats occupied by owners, (v) the names of the surveying companies providing valuation services, (vi) the valuation date for the price per square foot for a seven-year-old flat, (vii) the highest and lowest prices per square foot for a seven-year-old flat offered to the owners concerned, (viii) the names and numbers of flats of the housing estates in the same locality adopted for comparison in the valuation reports concerned, (ix) the date on which acquisition offers were made to the owners concerned, (x) the deadline for the owners concerned to accept the acquisition offers, and (xi) the percentage of owners who accepted the initial acquisition offer in the total number of the owners concerned;

(2) of the date on which the LandsD Guidelines were amended by the Government each time and details of the amendment(s), since the age of a notional replacement flat was adjusted downward from 10 years to seven years in March 2001;

(3) whether it knows if URA has, each time after the LandsD Guidelines were amended, forthwith amended its valuation guidelines accordingly; if so, of the dates and details of each amendment; and

(4) whether it will request URA to make public its valuation guidelines so as to enhance the transparency of the compensation arrangements for redevelopment projects; if not, of the reasons for that?
 
Reply:
 
President,
 
After consulting the Urban Renewal Authority (URA) and Lands Department (LandsD), my reply to the four-part question is as follows:
 
(1) According to the property acquisition policy of the URA, the acquisition price of a self-occupied domestic property offered by the URA to its owner-occupier is the market value (valued on vacant possession basis) of the property plus an ex-gratia allowance (i.e. Home Purchase Allowance (HPA)). For the owner-occupier of a domestic unit, the assessment of HPA is based on the difference between the market value of the property being acquired and the value of a notional replacement flat, which is a seven-year-old flat of similar size and in similar locality to the property being acquired and located at the middle floor with average orientation (i.e. commonly known as the seven-year-old flat).

The URA will appoint seven valuation consultancies to provide independent advice regarding the valuation of the notional seven-year-old replacement flat as the basis for calculating the HPA of various residential properties. Regardless of the scale of the redevelopment project, the valuation consultancies will take into account the features of the project and acquire adequate transaction data of comparable properties to assess the market value of the notional replacement flat. These valuation consultancies are selected from among those on the URA's list of registered consultants by independent external parties through open lot-drawing. Any consultancy in the trade can apply for registration on the list.

After the seven valuation consultancies have individually and independently assessed the price per square foot of the notional seven-year-old replacement flat, the URA will disregard the highest and the lowest figures of the seven valuations and adopt a simple arithmetic average of the remaining five valuations to arrive at the price per square foot of the seven-year-old flat, which will then become the basis of HPA calculation (the calculation mechanism).

The information of the redevelopment projects undertaken by the URA since 2008 is set out in Table 1.

Generally speaking, surveyors will select as far as possible transaction cases of appropriate properties within the district with similar characteristics and transport convenience and in dates close to the valuation date for comparison. Furthermore, the valuation date of the property will be as close to the proposed acquisition date as possible. The valuation reports of individual redevelopment projects are available at the URA's Neighborhood Centres for inspection by the owner-occupiers concerned.

The percentage of owners who accepted the initial acquisition offer against the total number of the owners concerned may vary for different projects due to a number of factors such as owners' preference, market situation, location of the project, distribution of ownership, how the property is occupied, problem of title defects and proportion of untraceable owners, etc. Therefore, it is difficult to give a general percentage in this regard. Among the 25 redevelopment projects undertaken since 2008, the percentages of owners who accepted the initial acquisition offer were mostly over 50%. The list of the consultancies responsible for the property valuation in a particular project will be sent to all the property owners concerned by the URA together with its initial acquisition offer.

Currently, the deadline for accepting the acquisition offer in an URA-initiated project is 60 days. For owners who do not accept the initial acquisition offer, the URA will consider making revised acquisition offer to them some time after the expiry of the initial acquisition offer having regard to the actual circumstances. 

The above calculation mechanism is an open, fair and impartial operation, which has been widely accepted and has all along been running effectively. The URA will continue to adopt the mechanism and review it from time to time to ensure its effectiveness.

 (2), (3) and (4) Since the LandsD published the Land Resumption and Compensation in the Urban Area - Guidelines for Owners, Occupiers and Surveyors (LandsD Guidelines) in December 2001, the guidelines concerning the Home Purchase Allowance and Supplementary Allowance have been revised three times (see Table 2 for the details and contents of the revisions). None of the revisions have involved any change to the compensation standard for assessing the value of a notional seven-year-old replacement flat.

The URA has not compiled any guidelines of its own which are independent of those of the LandsD. The URA will request its valuation consultancies to conduct the said valuations on the basis of the LandsD Guidelines.

Ends/Wednesday, June 7, 2017
Issued at HKT 15:00

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