How subdivision of flats yields higher profits

PUBLISHED : Sunday, 19 August, 2012, 12:00am
UPDATED : Sunday, 19 August, 2012, 10:26am

Demand for subdivided flats has mushroomed over the last decade, bolstered by immigration from the mainland and a recognition among owners that subdividing flats could make for big profits, says Institute of Surveyors spokesman Vincent Ho Kwok-kwan.

Older buildings are easier to subdivide than new ones, he says, making Sham Shui Po a hub for low-income housing.

"Units in old buildings are structurally more suitable for subdivision because they're usually rectangular shaped without too many internal structures," Ho said.

"Old buildings also often have looser property management compared to the tighter control in modern buildings."

And subdividing can also pay off for the landlords.

"The value of real estate is relatively low in Sham Shui Po; an apartment rental won't be near HK$10,000 a month," said Ho. "But if it is divided up into 100-200 sq ft subdivided units, which can be rented out for HK$3,000-4,000 each, that becomes a much more lucrative investment."

For a 900 sq ft apartment divided into nine homes, the rent could be HK$35,000 a month - four times what a single flat of that size goes for in Sham Shui Po.

Subdivided flats are not a new phenomenon in Hong Kong and have been common since the early 1900s, but they have been in the news recently following the discovery that a company linked to the wife of new secretary for development Paul Chan Mo-po owned subdivided flats.

There have also been safety fears, after two fires last year swept through subdivided flats, killing more than a dozen people.

Subdivision of flats is legal, but the Buildings Department has a lengthy set of design requirements for building works to mitigate the risk of fire, hygiene problems and structural failures. Flat owners rarely comply with them in full, however.

Earlier this year, the Buildings Department added eight new regulations for minor works that are commonly involved in subdivision of flats, setting additional standards for height, density and thickness of wall partitions.

"Many regulations exist but they're rarely enforced," Ho said.

"It is impossible for the Buildings Department to inspect every building, and most low-income renters wouldn't file complaints," Ho said.

Joanna Chiu