Leveraging property values for metro railway development in Hong Kong: experiences and lessons

Abstract

Joint development of real property and the metro railway by the Hong Kong MTR Corporation (MTRC) has contributed enormously to urban growth and spatial transformation of Hong Kong over the past four decades. This “rail plus property” (R+P) development model has also made the MTRC one of the most profitable and successful railway operators by world standards. Based on the theoretical framework of new institutional economics, this chapter explains why this model is more than simply using property incomes to subsidize metro railway development. It elucidates how the R+P model embodies an institutional arrangement that can effectively coordinate action of the government, railway operator, developers and other market players in transforming the urban built environment, and properly aligns their different interests and capabilities with appropriate incentives in accomplishing a desirable use of urban space. Successful implementation of the model requires supportive government land use and transport strategy, complementary project planning and development process, and competent and responsible organizations that strive towards making the best use of urban space and producing high-quality urban infrastructure and land development in fulfilling the private needs and the public interest. This chapter will examine the experiences of Hong Kong’s metro railway on urban spatial development and the property market, identify the critical success factors and highlight some potential problems of this model.