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Email this to a friendThe Economics Of Heritage Revitalization
Value adding to property and business in the World Heritage Site and its surroundings…. some random thoughts delivered at the Penang International Conference on Sustainable Cultural Development
By Jason Teoh – Henry Butcher Malaysia – 8th and 9th October 2009 at g-hotel
Key underlying trends
There is a general consensus that pre-war heritage properties are unique. There are about 10,000 such properties and more than half of them are located in the inner city of George Town.
With the recognition of George Town as a world heritage city and the ensuing market awareness of its commercial potential, the market for heritage real estate in the city has become relatively more vibrant with a 12.5% increase in transactions in 2008 compared to the year before.
According to official statistics the total transactions of prewar heritage buildings in the core, buffer and outside heritage zones hover around 320 units in 2006 and 2007 whilst last year saw an increase to 370.
This sector of the market occupies roughly only about 1.5% of the total annual volume of transactions over the last 3 years.
A commonly held thinking market participants considered prewar buildings to be deficient if they were other than new, modern and optimally efficient. The standard used to evaluate buildings was one of maximum possible usable area and minimum physical, functional and environmental obsolescences. Prewar heritage buildings were considered wasteful of space and energy, depressing to look at, difficult to keep clean and expensive to maintain. In most cases it was considered easier, cheaper and more practical to construct new buildings than to rehabilitate older ones.
While there is consensus that many stakeholders think that heritage property is an attractive long term real estate investment, they are not yet easily convinced of its financial viability from the perspective of the property market. There is an apparent lack of research on economic performance and sustainable growth in terms of investment returns.
As a world heritage city, urban conservation conjures images of a city with yet more stringent rules and guidelines imposed to prevent the destruction of its rich historic, architectural, cultural and social heritage.
A typical reaction of most property owners is that they will be deprived of the opportunity or even their right to reasonable economic profits from their prized possession through the principal of highest and best use. Heritage conservationists on the other hand promote conservation as a viable real estate strategy.
Urban conservation policies normally restrict the owner’s options in using a site. Restriction of options and the lack of public compensation to mitigate the loss can generally be expected to reduce value.
While such public policy produces social value by preserving buildings of interest for public enjoyment, according to a research by The University of Cambridge in 1994, the social aspects of this value are not reflected in the building’s market price. This is not surprising given the on going debate between private and public costs and benefits
The researchers further argued that in principle, planning uncertainty about what will be allowed would lead to lower values and less investment than would otherwise be the case.
Between these two extremes are stakeholders who may or may not appreciate heritage for its contributions to the liveability of the city. According to a recent USM research, most stakeholders want the inner city to be conserved and enjoyed but are not willing to pay for the costs.
However it is interesting to observe from many literatures the wide-ranging impacts of urban conservation which also suggests that in many places in the world such as Singapore and the US, such a policy has a positive effect on property values. However, is this phenomenon equally true for George Town?
Research conducted in various parts of the world shows a positive relation between conservation policy and property values.
However as the main driver of property values is population, the population in George Town has been reducing since 1970 from 260,000 to less that 180,000 in 2000 a 31% decline over a period of 10 years. Today anecdotal evidence suggests a further drop in population except for the occasional nocturnal noticeable presence of more people at certain hot spots. In order to promote some measure of economic vibrancy it is therefore pertinent to draw the night segment of people back to the city through various strategies including the concept of place making.
The Big Balance
Sometimes and perhaps with justification, we hear concerns that conservation results in a loss of economic potential for the building and the land it sits on. That, however, is not really the case every time. Often, smart and creative solutions can be found to balance the need for development and the safeguarding of the historic built heritage.
Undoubtedly, there is a need to continue to strike a balance and achieve an excellent blend of old and new buildings to give our city colour, character and charm.
Moving forward the imperatives are to hasten a comprehensive actionable business plan for George Town which may include championing quality restoration for “Good Efforts and Heritage Awards” such as that found in Singapore.
Property tax benefits such as in the US can also be considered.
Property tax relief is fairly common in the form of tax moratoriums, tax abatements, tax freezes or tax credits.
To obtain these benefits, the property owner usually has to promise in writing not to change the characteristics of the property for the period of the tax incentive and there may be a penalty for doing so.
In conclusion, ultimately given a vibrant property market, revenue through local tax or assessment can be expected from businesses in George Town.
By Jason Teoh – Henry Butcher Malaysia – 8th and 9th October 2009 at g-hotel
Key underlying trends
There is a general consensus that pre-war heritage properties are unique. There are about 10,000 such properties and more than half of them are located in the inner city of George Town.
With the recognition of George Town as a world heritage city and the ensuing market awareness of its commercial potential, the market for heritage real estate in the city has become relatively more vibrant with a 12.5% increase in transactions in 2008 compared to the year before.
According to official statistics the total transactions of prewar heritage buildings in the core, buffer and outside heritage zones hover around 320 units in 2006 and 2007 whilst last year saw an increase to 370.
This sector of the market occupies roughly only about 1.5% of the total annual volume of transactions over the last 3 years.
A commonly held thinking market participants considered prewar buildings to be deficient if they were other than new, modern and optimally efficient. The standard used to evaluate buildings was one of maximum possible usable area and minimum physical, functional and environmental obsolescences. Prewar heritage buildings were considered wasteful of space and energy, depressing to look at, difficult to keep clean and expensive to maintain. In most cases it was considered easier, cheaper and more practical to construct new buildings than to rehabilitate older ones.
While there is consensus that many stakeholders think that heritage property is an attractive long term real estate investment, they are not yet easily convinced of its financial viability from the perspective of the property market. There is an apparent lack of research on economic performance and sustainable growth in terms of investment returns.
As a world heritage city, urban conservation conjures images of a city with yet more stringent rules and guidelines imposed to prevent the destruction of its rich historic, architectural, cultural and social heritage.
A typical reaction of most property owners is that they will be deprived of the opportunity or even their right to reasonable economic profits from their prized possession through the principal of highest and best use. Heritage conservationists on the other hand promote conservation as a viable real estate strategy.
Urban conservation policies normally restrict the owner’s options in using a site. Restriction of options and the lack of public compensation to mitigate the loss can generally be expected to reduce value.
While such public policy produces social value by preserving buildings of interest for public enjoyment, according to a research by The University of Cambridge in 1994, the social aspects of this value are not reflected in the building’s market price. This is not surprising given the on going debate between private and public costs and benefits
The researchers further argued that in principle, planning uncertainty about what will be allowed would lead to lower values and less investment than would otherwise be the case.
Between these two extremes are stakeholders who may or may not appreciate heritage for its contributions to the liveability of the city. According to a recent USM research, most stakeholders want the inner city to be conserved and enjoyed but are not willing to pay for the costs.
However it is interesting to observe from many literatures the wide-ranging impacts of urban conservation which also suggests that in many places in the world such as Singapore and the US, such a policy has a positive effect on property values. However, is this phenomenon equally true for George Town?
Research conducted in various parts of the world shows a positive relation between conservation policy and property values.
However as the main driver of property values is population, the population in George Town has been reducing since 1970 from 260,000 to less that 180,000 in 2000 a 31% decline over a period of 10 years. Today anecdotal evidence suggests a further drop in population except for the occasional nocturnal noticeable presence of more people at certain hot spots. In order to promote some measure of economic vibrancy it is therefore pertinent to draw the night segment of people back to the city through various strategies including the concept of place making.
The Big Balance
Sometimes and perhaps with justification, we hear concerns that conservation results in a loss of economic potential for the building and the land it sits on. That, however, is not really the case every time. Often, smart and creative solutions can be found to balance the need for development and the safeguarding of the historic built heritage.
Undoubtedly, there is a need to continue to strike a balance and achieve an excellent blend of old and new buildings to give our city colour, character and charm.
Moving forward the imperatives are to hasten a comprehensive actionable business plan for George Town which may include championing quality restoration for “Good Efforts and Heritage Awards” such as that found in Singapore.
Property tax benefits such as in the US can also be considered.
Property tax relief is fairly common in the form of tax moratoriums, tax abatements, tax freezes or tax credits.
To obtain these benefits, the property owner usually has to promise in writing not to change the characteristics of the property for the period of the tax incentive and there may be a penalty for doing so.
In conclusion, ultimately given a vibrant property market, revenue through local tax or assessment can be expected from businesses in George Town.
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