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Donald Tsang

Will no-frills flats fill sandwich class needs?

PUBLISHED : Sunday, 31 July, 2011, 12:00am
UPDATED : Sunday, 31 July, 2011, 12:00am

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Just what is a 'no-frills flat'?

Nine months after Chief Executive Donald Tsang Yam-kuen promised to build plenty of smaller, more affordable homes, no government department can tell you what the term specifically means.

But that hasn't stopped the sandwich class - middle-class people too well-off to qualify for public housing but not rich enough to dive into the city's red-hot property market - from welcoming the prospect of less expensive, less extravagant offerings from developers.

Many of them are fed up with shopping for flats and finding that nearly every development comes packaged as a luxury product, complete with large, showy clubhouses and lots of fancy facilities they doubt they'll need.

Since Tsang's pledge, plans for almost 13,000 so-called no-frills apartments have made it to the drawing board. They are destined to be built during the next six years, mostly in the New Territories or outlying areas.

But some academics and professionals are questioning the strategy. They're troubled by the programme's lack of definition. Although it's clear that buyers want more affordable flats, it's not clear they want smaller ones. And will removing clubhouses, keeping down building-material costs and shrinking room sizes really make developments much cheaper? After all, it's the lack of available land that really drives up prices in Hong Kong.

Professor Chau Kwong-wing, of the University of Hong Kong's department of real estate and construction, said the 'no-frills flats' policy was more a lofty-sounding slogan than an effective means of containing property prices.

'If we create more disillusion,' Chau said, 'it could make things worse.'

In a mock-up clubhouse at an estate developed by the MTR Corporation and Cheung Kong (Holdings) above Tai Wai Station, you will find a lit-up catwalk and sofas in a room with big mirrors, resembling a stage.

A property agent explains that the room is for women's gatherings: the ladies can show off their new clothes by walking down the aisle. Next to it is a merry-go-round with glittering horses, a children's attraction usually seen in theme parks.

In Sha Tin, densely packed high-rises with extras like a doorbell decorated with Swarovski crystals go for almost HK$9,000 per square foot.

'I was very tired of visiting those extravagant show flats. To me, the clubhouse is nothing. But I'm given no choice,' said Cindy Yiu, who graduated from university in 2004 and got married two years ago. She and her husband, with a monthly income of about HK$40,000, lived with their family for a year after marriage as they couldn't find a flat they liked and could afford.

They visited mock-up flats in at least six new developments. 'Frankly, the show flats really look appealing,' Yiu said. 'But their prices are unreasonably high. How come a single block in Tai Kok Tsui next to a red-light district can be depicted as a grand living space?'

Grand may not mean spacious. In some flats Yiu visited, she had to take off her slippers and immediately get on to the bed when entering the bedroom; it can only hold a small closet and a bed 21/2 feet wide.

Clubhouses also boost management fees, which average more than HK$1,700 - too much for a young couple at the start of their careers and burdened by other expenses such as health insurance, Yiu said.

'We were frustrated as no one caters for our needs,' she said. 'To people like us, no-frills flat could be a way out.'

The couple eventually bought a second-hand flat of more than 500 square feet in Tseung Kwan O last April. They paid about HK$2 million - about HK$ 3,800 per square feet, half the price of those luxury flats.

Yiu's sentiment resonates with a lot of others of her age, the so-called post-80s generation. 'I'm lucky compared to my friends,' she said. 'They are still seeking [a flat].'

Almost 13,000 no-frills flats will become available during the next six years, according to projects announced by the housing and land officials in the past nine months.

Of these, 5,000 will be built under the My Home Purchase Plan, which allows buyers to rent the flat at first and complete the purchase later. More than 1,250 flats will be provided in redevelopment projects by the Housing Society, and 1,700 homes from the Urban Renewal Authority. More than 4,900 flats will be built along the West Rail Line.

They are mainly located in the New Territories and areas like Tsing Yi and Tuen Mun. To speed up the supply, four West Rail projects in Nam Cheong, Tsuen Wan and Long Ping will be tendered by the end of this year and early next year.

Besides designating the sites for no-frills flats, the government has also imposed flat-size restrictions on at least six sites to be auctioned or tendered - providing more than 3,900 flats - since Tsang's October policy address.

Yet, to the surprise of some developers, property specialists and professionals, the administration still has no answer as to what qualifies a no-frills flat and how the new concept will be implemented.

One thing is certain: The flats will be small to medium-sized, with saleable area ranging from 370 sq ft to not more than 646 sq ft. In the case of the West Rail properties, the largest flats won't exceed 538 sq ft.

A Transport and Housing Bureau spokesman said the bureau had no standard definition of a no-frills flat.

'Generally speaking, 'no-frills' refers to the design of a development which is functional and not extravagant,' he said. 'In the case of My Home Purchase Plan, there will be no elaborated ancillary facilities, such as a large-scale clubhouse or recreational amenities, and the flats will be of high efficiency ratio.'

An MTR Corp spokesman said the company was still drafting the tender documents for West Rail projects, including the 'no-frills requirements', while the Urban Renewal Authority said it had not finalised its definition of a no-frills flat.

Last month, the Hong Kong Institute of Architects released a proposed set of no-frills guidelines. Apart from stripping out unnecessary facilities like a swimming pool and prestigious main lobby, the institute said buyers should be given an option to select different fitting-out packages to avoid repeated refurbishment that caused wastage.

'Giveaway' electrical appliances like microwaves and clothes dryers were unnecessary, the architects said, and building materials should be long-lasting and cost little to maintain. Having removed the extras, the architects set out minimum standards for the bedroom size and flat height, in the belief that small apartments could still accommodate basic needs of buyers. But buyers might want more than the basics, according to Donald Choi Wun-hing, managing director of Nan Fung Development, who explained the logic behind the giveaways and extravagant designs.

He said the difference in the construction cost of a no-frills flat and a nicer flat was just about 10 per cent. With the giveaway appliances, users get both convenience and a cheaper price, because developers purchase the appliances in bulk.

'It depends who the target buyers are,' Choi said. 'I think they will find a microwave useful for a flat as small as 300 sq ft.'

High land costs made developers reluctant to offer buyers different fitting-out packages to choose from, because the earlier the flats were sold, the sooner they can return their bank loans, Choi said.

Choi doubted the concept of no-frills flats would address the market demand, given the ageing population and the eagerness of buyers to see a return on their investment in housing. He said market trends showed buyers often preferred a flat with more facilities, as they had higher investment value.

'The government never shows us supporting data about the popularity of small flats,' he said. 'In fact, the city may need larger flats so that the next generation can take care of their elderly by living together.'

Choi said developers may seek a minimum rate of return to balance the risk if they were forced to keep building no-frills flat through tender or land-lease conditions. The Real Estate Developers Association declined to comment on the issue.

Lawrence Poon Wing-cheung, a professor studying housing issues at the City University and a spokesman for the Institute of Surveyors, said limiting the size and design of new flats was not an effective way to fulfil Hongkongers' aspirations of owning a flat rather than renting one.

'First, it's not feasible to control the detailed design and materials used for a development, except in projects co-developed by the administration,' Poon said. 'Second, if people simply want a flat of their own, there are plenty of small to medium-sized [second-hand] flats available.'

According to Rating and Valuation Department statistics, almost 80 per cent of existing private flats last year ranged from 210 sq ft to 750 sq ft, most of them located in the New Territories. Flats of more than 1,000 sq ft accounted for only 7.5 per cent of the available stock. Fifty-five per cent of new private flats completed last year were small to medium-sized.

'For those who simply want a flat, they won't wait for a no-frills flat of uncertain price to be completed in years. Existing second-hand flats already satisfy their demands,' Poon said. 'Who says a smaller flat is cheaper? It can be expensive in terms of per-square-foot price in a blooming property market.'

Poon said the public was unhappy with tricks used by developers to reap profits, as well as widespread property speculation. 'Creating no-frills flats is only a political gesture. It isn't addressing the problems.'

Disgruntled Hongkongers really wanted more than basic shelter, Poon said. They wanted something that would improve their living standard and accumulate wealth. Not a tiny space in a remote area without amenities.

He said architects advocating for a decent living space - such as by setting a minimum size for bedrooms - should be calling for those standards to be upheld in all types of flats, not just no-frills projects.

Wong Leung-sing, associate director of research at property agency Centaline, argued that the designation of prime sites, such as those along the West Rail Line, for no-frills flats was an inefficient use of land resources and would diminish the government's land revenue.

He said he had a better alternative. Instead of limiting the designs of flats, the government should confine some flat sales to first-time buyers who are Hong Kong residents.

'This option doesn't involve substantial spending of public money and avoids speculations by mainlanders,' Wong said. 'Given clear target users, developers will adjust the designs of developments.'

The provision of no-frills flats may paint an attractive picture for those frustrated by the unreachable prices and the lack of options in the property market like Yiu. But Chau said prescribing tender conditions - such as the height of the lobby's ceiling and how many facilities were allowed - was almost impossible.

Developers, he said, can always find a loophole: 'They may encourage buyers to combine two small flats and make it a larger one.'

Chau said the ultimate solution to rein in the property price would be to increase the land supply. 'If a tiny no-frills flat without facilities is sold at HK$3 million, will the public still fancy it?'

11.4

The median flat price-to-median household income ratio in the city, the world's highest, according to research by Demographia

Basic living

Features for 'no-frills flats' recommended by the Hong Kong Institute of Architects

Bedroom must be at least 2.1 metres square

Saleable area ranging from 350 to 650 square feet

Balcony in proportion to flat size

Cross-flat ventilation in dining/living room

Minimum floor-to-floor height around 3.15 metres

Buyers should select fittings as desired

Universal design should be adopted for all flats

No elaborate entrance lobby, but low-maintenance interior finishes with cross-ventilation

Clubhouse facilities limited to multi-purpose room, library, study room, gym, children's play area and landscaped area. Swimming pool not necessary

Source: Hong Kong Institute of Architects