Case Studies of Value Uplift
Kwun Tong Line Extension, Hong Kong
Authority: MTR Corporation Limited
Area: Kowloon City District, Hong Kong, SAR, China
Project: 2.6km Extension of the Existing Kwun Tong Line
Mode: Underground Rail
Cost: 5.3 Billion HKD (2009)
Value Capture: Rail plus property
The Kwun Tong Line extension is adding an additional 2.6km of underground rail line, connecting the existing line from Yau Ma Tei station to the newly developed Whampoa station. The Ho Man Tin interchange will also be developed and improve connections to the central island. This development will offer reliable, convenient and fast transportation to these areas served predominantly at present by motor vehicles 1. Whilst a short section of track, it has substantial impacts on travel times, from 25mins by car to 5mins on the proposed line. 146,000 residents will be serviced by the line once complete 2.
Impacts of development
Significant travel time reduction and the anticipated mode shift from vehicles to train that will happen once the development is complete, gives the line a very high economic rate of return (8% annually). The high economic gains come from direct travel time reductions to users of this service, as well as road network capacity improvement resulting from the predicted reduction of cars originating from a central and strategic location, increasing flow rates across the transport network 3.
Value Capture Mechanism
Despite the high economic rate of return, a poor financial rate of return leaves a funding gap of $3.5 billion HK (2009). To plug this funding gap and enable the development, the Hong Kong government gave special concession to the MTR Corporation to develop the Ex-Valley Road Estate Site near the proposed Ho Man Tin interchange. A 5 tower, 1800 apartment complex is proposed for the site. Developing this site leverages the increased value of this real estate and its proximity to transport, enabling the use of profits for rail development; a model the MTR is very experienced in using 4.
Despite some government owned shares, the MTR is a listed company and as such is profit motivated. This motivation means it will seek good financial rate of returns. In this case the government was criticized by some for gifting the MTR a very valuable strategic site that had been earmarked for social housing, with suggestions the profit that the MTR will receive from the development of the site is disproportionate to the funding required by the MTR to build the line 5.
- Kwun Tong Line Extension - Background. (n.d.). Retrieved August 13, 2015.
- Transport and Housing Bureau. 2014. Progress update of the South Island Line (East) and Kwun Tong Line Extension. [PDF]
- MTR Corporation Limited. (2008). Legislative Council Brief: Shatin to central link and MTR Kwun Tong Line Extension. [PDF]
- MTR Corporation Limited. (2011). Legislative Council Brief: Kwun Tong Line Extension Funding Arrangement. [PDF]
- Yuanhua, K., (2012) The Government should retrieve property ownership from MTR and provide affordable units. Retrieved August 11, 2015. [PDF]