CLEAR the air
Homebuyers in Hong Kong will soon be facing something their counterparts in most countries are used to - the use of 'saleable' floor area rather than 'gross' floor area when calculating prices in transactions.
This is a result of a change in government policy to increase transparency in the property market. For decades, the vaguely defined gross area, which may include communal areas such as public corridors, is used. The actual size of a home, the saleable area, is only a percentage of the gross area depending on the property's efficiency rate.
The government considers the use of gross disadvantageous to consumers, and is in the process of legislating to push for the exclusive use of saleable area in first-hand properties.
The Estate Agents Authority says that from January 1 next year, agents advertising secondhand properties will have to give at least equal prominence to the display of a property's saleable area as the gross area.
Charles Chan, managing director for Savills Valuation and Professional Services, says the impact would be greatest in luxury houses, typically with gardens and garages, where the efficiency rate can sometimes be as low as 50 per cent.
'That means the per-square-foot price of a luxury house could jump from, say, HK$50,000 to a staggering HK$100,000, if measured in saleable area,' Chan says.
Chan is not overly worried that buyers will be put off. 'Because the net price of the property is the same regardless of whether it is calculated by gross area or saleable area,' Chan says.
Eddie Hui Chi-man, a professor in Polytechnic University's building and real estate department, says 90 per cent of property transactions are in the secondhand market, where the use of gross area is 'deep-rooted'.
'The market will need time to get used to the change, many people do not even know the saleable area of the unit they live in,' he says, adding that the efficiency will be priced in the value of each property.
'The price per square foot in terms of saleable area for properties with low efficiency will rise sharply,' Hui says.
Thomas Lam, head of research at Knight Frank in Greater China, says the change may have some psychological effect on some buyers, but that is unlikely to be the key factor in buying decisions.
'People will look at whether the property is efficient, and also whether they like the layout, and whether there is a clubhouse and so on. At the moment, people will be more concerned about the financial problems in Europe,' Lam says.