The growing number of ageing buildings in Hong Kong makes redevelopment the only available option. The important task rests squarely on the shoulders of the Urban Renewal Authority (URA), whose job has been made more difficult by a weak property market and shrinking coffers.
The cash-strapped authority has risen to the challenge by tapping overseas funding and issuing bonds for the first time in many years.
The statutory redeveloper suffered a deficit of HK$3.5 billion (US$448.2 million) in 2022-23, the first in almost a decade. The shortfall crept further to HK$3.9 billion last year, including an operational deficit of HK$830 million and a HK$3.1 billion provision for projects already started that may be devalued.
The losses are not surprising given the weaker-than-expected recovery since the Covid-19 pandemic. But, unlike other commercial entities, the market-sensitive operations and rigid statutory mission of the URA mean there is much less room to manoeuvre.
With an array of projects costing more than HK$64 billion on the way and a cash flow of just HK$18 billion, the need for new funding is evident.
The government has already raised the borrowing limit of the URA from HK$6 billion to HK$25 billion, paving the way for it to tap into commercial funding for projects.
As the bonds will be issued in Hong Kong dollars, promotional efforts are understandably targeting investors from the Asia-Pacific region, including those in Singapore and Macau.
The positive response to the Airport Authority bond offering to help pay for the third runway serves as an example of how to raise funds when public finance is tight. Whether it works for property projects in the prevailing interest rates environment remains to be seen.
But, with firm government backing and a credit rating of AA+, the URA is in a good position to reach out to overseas investors.
Hong Kong’s finance, officials say, remains as robust and bright as its future. There is no reason for foreign investors to shy away from opportunities that offer good returns.
Hopefully, the actions of the URA may not only increase financing for new projects, but also raise confidence in the city’s economy and future.