URA

MANAGEMENT DISCUSSION AND ANALYSIS 52 Current Position Up to 30 June 2018, the URA had commenced and implemented 61 projects, comprising 58 redevelopment projects, two preservation projects and one revitalisation project since its establishment in 2001. Additionally, six redevelopment projects were undertaken in association with the Hong Kong Housing Society (HKHS). Of these 67 projects, 23 have been completed and the remainder are under planning, acquisition or construction. The URA has also taken over to continue the implementation of ten projects that were being implemented by the former Land Development Corporation before the establishment of the URA. Challenges and Opportunities To mitigate the risk posed to the value of the URA’s properties under development in the event of a property market downturn, the URA has endeavoured to clear and tender two and four projects respectively that have been backlogged over the years. These tenders have helped to reduce the market exposure of properties under development. Such actions are appropriate at a time when the property market is at an all-time high (see Figure 1) and yet housing supply is rising with some 96,000 units becoming available in the next three to four years. This rising new housing supply, together with an upturn in interest rates, could negatively affect market sentiment. The risks are further compounded as the URA is obliged to bear high development costs by acquiring properties in its projects under the “7- year rule” and together with ex-gratia payments, which are markedly higher compared to those incurred by private-sector developers. This has led to a disparity over the past several years between the accommodation value (AV) of our projects at acquisition and at project tender. Our analysis shows that the average AV at acquisition is about $8,700 per square foot, much higher than the average AV of $7,300 per square foot at project tender. Construction costs meanwhile, though largely steady in the last two years, remain high (see Figure 2). Challenges of urban renewal: Difficult to race against time and catch up the pace of urban decay