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.