Developers turn to small flats as stamp duty bites

Sun Hung Kai Properties, the biggest developer in Hong Kong in terms of market share, says it will build more small flats in its new projects in response to a sharp fall in demand for luxury homes.

The decision comes after transactions for homes priced above HK$20 million dropped by half in May as buyers baulked at continuing to pay stamp duties that were doubled on a sliding scale from 4.25 per cent to a top rate of 8.5 per cent in the case of homes sold for HK$21.73 million and above. That lifted the top duty on a flat sold for this price from HK$923,525 to HK$1.85 million.

The stamp duty move was aimed at curbing investment demand, and the latest market data indicates it is achieving that objective, said agents and property analysts.

"In view of the recent changes in the condition of the market, small units will have better marketability," said SHKP deputy managing director Victor Lui Ting.

The phase three development of its residential project Yoho Town in Yuen Long will be dominated by units sized between 400 and 500 square feet. Larger flats previously aimed mainly at mainland buyers will be scaled down by as much as a third of their former size to reduce their selling prices.

"Several years ago buyers wanted bigger terraces, bigger roofs, and bigger private pools. But now the profile of our clients has changed and they have different tastes," said Lui.

The next phase of the Yoho Town development will contain fewer special units with smaller terraces, sized between 1,000 and 2,000 sq ft. The previous phase of development included 3,000 to 4,000 sq ft units with large terraces and private pool.