Building Age and Property Price

As professional valuers, we frequently encounter a common question from clients: Why do property prices of traditional housing estates appear to lag behind those of new housing estates? To address this phenomenon, we conducted an analysis.

We selected a number of properties for comparison: traditional housing estates with approximately 40 years of history or more, including Taikoo Shing, Mei Foo Sun Chuen, and Whampoa Garden; and new housing estates with an age of around 20 years, such as Grand Promenade, Manhattan Hill, and Grand Waterfront. Our focus was on tracking property price changes over the past decade.

Surprisingly, the property prices of these traditional housing estates have experienced an increase of 18% to 25% during this period. In contrast, the newly developed housing estates have witnessed a more substantial rise, with prices climbing by 29% to 35%. The question remains: Why are the traditional housing estates underperforming?

Smaller Room for Appreciation for Older Buildings?

The appreciation of property prices in traditional housing estates has been sluggish, and several factors contribute to this phenomenon.

Building Age and Mortgage Terms: Banks play a crucial role in shaping property prices. When reviewing mortgage applications, they consider the building’s age. Typically, banks calculate mortgage terms by subtracting the building’s age from 75 or 80. Consequently, older properties receive shorter mortgage terms. If a property’s mortgage term is less than 30 years, it is priced at a discount.

Maintenance Costs: Older buildings require more maintenance. Items like exterior walls, lifts, and pipes demand special care. To account for these additional costs, property prices are adjusted downward.

Advancements in New Housing Estates: Recent changes in the Buildings Ordinance, including green building requirements, have led to more sophisticated designs in new housing estates. Buyers now seek features beyond the basics—such as well-appointed clubhouses, modern kitchens, and luxurious washrooms—and are willing to pay a premium for these amenities.

Many traditional housing estates in Hong Kong boast strategic locations, often covering expansive areas exceeding 10,000 square feet. These estates are strategically positioned above MTR stations or within urban areas, offering breathtaking sea views and convenient transportation access. However, despite their prime locations, the price per saleable square foot (psf) in these estates typically ranges from HK$11,000 to HK$14,000.

In contrast, newly developed estates command significantly higher property prices—often one to two times more than their traditional counterparts. This disparity arises from several factors, including modern amenities, architectural advancements, and evolving market demands.

Our study also sheds light on an intriguing trend: housing estates nearing the 50-year mark experience accelerated depreciation. This phenomenon is closely tied to mortgage terms, as banks factor in building age when assessing loan applications. Consequently, properties with shorter mortgage terms tend to depreciate faster.

While both new and traditional housing estates attract interested buyers, valuation assessments conducted by banks and professional surveyors emphasize the critical role of age and building quality. Prospective residential property buyers should carefully consider the relationship between a property’s age and its price before making informed decisions.