Hong Kong’s biggest developers are joining the rush to build small flats to woo young buyers as prices in the world’s most expensive housing market approach an all-time high. The move is being criticised by a senior adviser to Beijing for its profit motive.
Sun Hung Kai Properties (SHKP) plans to build 5,400 units in Sai Kung, with the smallest featuring a usable floor area of about 88 square feet (8.2 square metres), according to a filing with the Buildings Department.
In Kowloon, a consortium of Wheelock Properties, Henderson Land Development, New World Development and China Overseas Land & Investment plan to build a 1,591-unit residential development with sizes starting at about 120 sq ft. The measurements of flats in both projects exclude space allocated for kitchen, bathroom and balcony, the filings show.
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Sales of small flats in recently launched projects have received strong response even as lived-in home prices have increased for seven consecutive months this year. An index measuring the prices of second-hand homes stood at 396.3 in July, just 0.15 per cent below the previous peak of 396.9 in May 2019, data from the Rating and Valuation Department showed. Home prices gained 4.3 per cent in the first seven months this year.
“We will see more small flats put on sale as home prices continue to surge,” said Victor Lai Kin-fai, the chief executive of property consultancy Centaline Professionals. “Frankly speaking, small flats that require smaller lump sum amounts will fetch a higher selling price per square foot and are easier to sell than large units.”
Lai said that the estimated saleable area of the flats in the two projects, inclusive of an open kitchen, a bathroom and a balcony, would be around 200 to 300 sq ft.
Small- or nano-sized flats are not going down well with Lau Shui-kai, vice-president of the semi-official Chinese Association of Hong Kong and Macau. The senior adviser to Beijing said such flats only help developers to generate higher selling prices and profit and fail to solve the city’s housing problem.
“Hong Kong’s nano flats have become a laughing stock of international media,” Lau said. “These shoebox-size flats will also leave our younger generation to live in an unhealthy environment and increase their despair and frustration.”
The central government does not want to see shrinking living spaces, he added.
His remarks came after Beijing officials last weekend asked Hong Kong developers to help solve the city’s housing problems. It triggered a sell off in property stocks on Monday amid concerns China could ask the Hong Kong government to impose more regulations to contain home prices.
Lau said increasing land supply could help in solving the city’s housing shortage.
SHKP’s project in Sai Sha Road has 12 different unit sizes ranging from about 88 sq ft to 972 sq ft. While the plan shows only two units measuring about 88 sq ft, 218 flats are slightly bigger at about 130 sq ft. Some 60 per cent, or 3,195 flats, will have an area of about 283 sq ft.
SHKP said the smallest flats at the Sai Sha project will have a saleable area of around 300 sq ft, and this type of one-bedroom flats will make up only a small percentage of the total. Most units will have two or more bedrooms. Since the Sai Sha project is very large in scale, with different phases offering about 9,500 units, SHKP keeps revising the general building plans and the one currently filed with the Buildings Department does not reflect the latest design.
In Kai Tak, Wheelock Properties’ joint venture project will have units ranging from about 120 sq ft to 883 sq ft. Of the 1,591 units, 130 units or 8 per cent will have an area of about 120 sq ft, while 44 per cent or 700 flats will be 281 sq ft, the plan shows.
Wheelock’s managing director Ricky Wong Kwong-yiu said the saleable area for the units at Kai Tak would be much bigger after taking into account the toilet, kitchen and balcony.
“There is market demand for studio and one-bedroom flats [as they require] smaller down payments for mortgages,” Wong said, adding that the main focus of the Kai Tak project was two-bedroom units.
Tai Hung Fai Group is also joining the rush. A six-storey, 30-unit development called Artique in Sheung Shui will have units ranging from 138 sq ft to 259 sq ft, according to a sales brochure posted on the company’s website. The developer’s smallest flat is 10 sq ft bigger than the city’s tiniest flat measuring 128 sq ft at TPlus in Tuen Mun.
Tai Hung Fai is yet to announce prices and launch date for the sales.
Last weekend, Kwai Hung Group sold 128 of the 130 units at its Mangrove project in Hung Hom even after banks stopped providing mortgage financing amid concerns over the developer’s ability to complete the project, which is due to be ready in June next year. Banks have said they will only provide mortgages to buyers for flats in the project after its completion.
Prices at Mangrove range from HK$3.3 million for a 186 sq ft studio to HK$9.08 million for a 333 sq ft one-bedroom flat. The average per square foot price at the project range from HK$17,281 to HK$28,016.
Real estate consultants Knight Frank forecast that the supply of new private flats in the city would reach 82,000 from now until 2025, of which 36 per cent or 29,500 flats will be smaller than 400 sq ft, up from 31 per cent of existing stock.
“Small flats sell like hot cakes as prospective buyers worry they will miss the boat after seeing a sharp increase in home prices,” said Martin Wong, head of research at Knight Frank.
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