The evidence of value enhancement resulting from rehabilitation

Abstract

PurposeThe long‐standing urban decay problem in Hong Kong continues to receive attention from the government and concerned organisations. However, little attention is paid to the financial benefits that can be achieved after old buildings are rehabilitated. This study seeks to evaluate and quantify the value enhancement of aging buildings resulting from rehabilitation.Design/methodology/approachUsing the direct sales comparison method, the study critically examines over 80 sample buildings across Hong Kong. Residential properties with rehabilitation completed in the public sector are chosen as samples for numerical analysis.FindingsThe results show that: the capital value of the sample buildings after rehabilitation increased by an average of 35.6 percent; the overall appreciation rate of the sample buildings (35.6 percent) exceeds that of other buildings in the same district (20.8 percent); the average price increase of the sample buildings (25.7 percent after adjustment) is greater than that of Type B (40‐69.9 square meters) buildings (18.9 percent) in Hong Kong; positive growth in transaction volume is evidenced from the sample buildings in four districts; and, on average, the benefit to cost ratio of rehabilitation per unit is 10.9 and the net benefit per square foot is HK$461.4 (or US$59.2).Research limitations/implicationsThere are potential risks of error arising from the use of assumptions, price adjustments, limited sample size and data from the secondary source.Practical implicationsThe analysis is of relevance in confirming the value enhancement arising from rehabilitation and the findings provide a motive for the industry and public for rehabilitation.Originality/valueThe significance of this study is the quantification of the positive effect of rehabilitation.

Difficulties in executing the Mandatory Building Inspection Scheme (MBIS) for existing private buildings in Hong Kong

“…In addition, Chan and Morris (1997) also pointed out the construction speed of buildings was achieved at the expense of quality in late 1960s and early 1970s; it is consistent with the supposition of Leung and Yiu (2004) e the private buildings constructed in the 1959e1965 and 1971e1975 cohorts were vulnerable to premature deterioration of reinforced concrete because of the high chloride content of concrete used for their construction. Furthermore, Hui, Wong, and Wan (2008) believed that the hot and wet climate in Hong Kong is directly associated with the old age of the buildings, together with the less stringent statutory requirements and poor quality of construction materials and workmanship, play a role in the ageing trend.…”

Does comprehensive redevelopment change the housing price gradient? A case study in Mongkok, Hong Kong

“…For example, various methodologies have shown that a price premium resulted from housing rehabilitation in Hong Kong (Chau et al, 2003;Yiu and Leung, 2005;Hui et al, 2008). It was also determined that expenditure on minor home improvement resulted in a profit of between 1 and 8% to homeowners in New Zealand (Fortes & McCarthy, 2010).…”

An empirical survey of the perceived benefits of implementing the Mandatory Building Inspection Scheme (MBIS) in Hong Kong

“…Tan et al (2012) opined that a proper maintenance scheme for the dilapidated buildings can contribute to sustainable development by providing a more comfortable living environment and extending the service life of the existing premises. A plethora of reported literature have substantiated that proper maintenance of buildings can maintain or even enhance their property values (Chau et al, 2003;Hui et al, 2008;Martinaitis et al, 2004;Robinson and Reed, 2002).…”

“…In addition, Chan and Morris (1997) also pointed out the construction speed of buildings was achieved at the expense of quality in late 1960s and early 1970s; it is consistent with the supposition of Leung and Yiu (2004) -the private buildings constructed in the 1959-1965 and 1971-1975 cohorts were vulnerable to premature deterioration of reinforced concrete because of the high chloride content of concrete used for their construction. Furthermore, Hui et al (2008) believed that the hot and wet climate in Hong Kong is directly associated with the old age of the buildings, together with the less stringent statutory requirements and poor quality of construction materials and workmanship, play a role in the ageing trend.…”

“…An extensive desktop literature search proved that proper maintenance of buildings can maintain or even enhance their property values (Chau et al, 2003;Hui et al, 2008;Martinaitis et al, 2004, Robinson andReed, 2002). Besides, a well-organized and properly preventive maintenance programme can ensure healthy building conditions by avoiding maintenance failures as reported by Small (2009); and the owner may also participate in building care with a view to better living environment and healthier lives (Yau, 2010).…”