Space comes at a cost. Older flats tend to be bigger than new, but there are considerations, writes Kenneth Ko
Developers are aggressively marketing high-profile projects in the primary market using extensive advertising campaigns, television commercials and print media.
Show flats get a full makeover to draw homebuyers, and emphasis is on comprehensive clubhouse facilities.
But is it the right time to buy a new property? The answer is yes, if the actual living space is a secondary concern.
It is a fact of life in Hong Kong that new flats have a lower efficiency ratio, meaning less useable interior space in the property than flats built more than 10 years ago.
Shopping around in the primary market reveals that a 70 or 75 per cent efficiency rate is commonplace for new flats.
This compares with the average rate of 80 per cent about 10 years ago and a rate of up to 90 per cent more than 20 years ago.
The root cause is the lack of regulations governing the definition of gross floor area in property sales.
Without a uniform system, developers are basically free to include common and ancillary areas in the gross floor area, which is the yardstick for the calculation of sale prices.
Taking an 800 sqft flat as an example, you may find that 200 sqft of the quoted space includes shared ancillary areas such as corridors, lift shafts, plant rooms, staircases, lobbies, communal toilets, bay windows and clubhouse facilities.
New residential projects, especially those that are large scale, often come with comprehensive recreational and clubhouse facilities. An integrated clubhouse is one of the marketing ploys to draw buyers.
But everything comes at a cost. The larger the clubhouse, the lower the efficiency rate buyers will get for the property.
It is not surprising that a new 800 sqft flat will end up with less actual living space than a 600 sqft flat built more than 20 years ago. Of course, the older flat usually has no clubhouse facilities.
Midland Realty chief analyst Buggle Lau Ka-fai says there is a price gap between new and old flats.
Depending on the location, new residential properties usually have a price premium of 15 to 20 per cent over older properties, and the gap may be up to 30 per cent in selected urban districts.
'Besides the price differences, homebuyers will also look at the efficiency rate of the property. But what matters is that the property meets with the buyer's expectations and needs,' he says.
For example, the quality of new flats is usually higher and their value has a better potential to rise in a property market uptrend.
'In addition, new properties mostly include balconies and utility platforms. These environmentally friendly building features not only improve the air flow of the unit but also add to the property's appeal to buyers,' he says.
'The availability of new flats and old flats offers home-seekers different choices. Those looking for higher efficiency and more spacious interiors will go after the older flats in the secondary market.
'Others looking for more recreational and clubhouse facilities will turn to the primary market.
'There are certainly some people who would like to leave their old flat and move into a new property with more clubhouse facilities, although they may end up living in a smaller interior space.'
Mr Lau acknowledges the growing concern of a shrinking efficiency rate in the primary market, but says it is essential that homebuyers inspect the property to ensure it is of the quality and size they expect before buying.
Hendrick Leung, director and general manager of Centaline Finance, says prospective homebuyers can pick up their preferred properties from among the large stock of second-hand flats and they will usually spend more time shopping around before making a decision.
'In the primary market, buyers may need to make a quicker decision to buy at the developer's sales office when the projects they choose come up for sale.
'This is especially true during a market boom,' he says. 'Some developers will line up with banks to provide preferential mortgage financing for people buying their new projects.
'Buyers should take advantage of this kind of mortgage offer because developers can often secure favourable terms through their well established relationships with banks. However, sometimes new flats are being developed in new towns or new districts where community amenities may not be well established.
'People with children and the elderly may not like to move into an area in the early stage of the district's development. It will also be more difficult to find tenants if you are an investor.'
Mr Leung says buyers should be aware that the mortgage tenor for old flats is shorter than new flats, meaning that they may need to make a higher down-payment or have enough financial resources to cope with a larger instalment amount every month within a shorter loan period.
Comfortable living has a different meaning to different people. There is no right or wrong in buying a new flat or an old property and it all depends on what you need and aspire to live in.
It may be less expensive to buy an old flat with a high efficiency rate compared with a new property. The buyer probably needs to take into consideration a certain amount of renovation outlay to refurbish or upgrade the interior of the property.
The lack of clubhouse facilities can be easily compensated for by joining one of the many fitness and health clubs in the city.
New flats feature better architectural detail as well as value-added building features and recreational facilities, although at the expense of actual living space.
Those looking for vogue living and lifestyle will probably go for a new apartment. They can always use mirrors to disguise the low efficiency rate and create the illusion of more space.