HONG KONG (BLOOMBERG) - In a city with stratospheric land prices, run-down buildings can be hot property.

Hong Kong developers are increasingly acquiring and revamping old buildings as land gets more expensive. The number of applications for compulsory sales - allowing developers to gain full control of an apartment block after securing 80 per cent ownership - climbed to a six-year high in 2018, government figures show.

"A red-hot government land sales market in 2017 and early 2018 and large plots on offer - which translates into bigger lump-sum investments - effectively shut out a lot of small-to-medium sized developers," said Mr Denis Ma, head of research at Jones Lang LaSalle. These companies were forced to focus on breathing new life into old buildings to sustain their development pipelines, he said.

Rejuvenating old buildings also allows developers to get a foothold in prime areas where land is scarce, according to Mr Reed Hatcher, head of research at Cushman & Wakefield.

During the height of the property boom between early 2017 and mid-last year, land sold at government tenders fetched increasingly eye-watering prices. Sun Hung Kai Properties paid an unprecedented US$3.2 billion (S$4.35 billion) for a residential site near the city's former airport in May, almost 1½ times the previous record set in November 2017.