Hong Kong to see surge in tiny flats as demand remains strong

Demand for ever-smaller homes remains strong due to cheaper prices, with developers expected to build increasing numbers of shoe-box flats

PUBLISHED : Tuesday, 29 July, 2014, 4:08pm
UPDATED : Wednesday, 30 July, 2014, 10:36am

Developers are expected to produce more tiny flats in their future projects given the frenetic buying spree for shoe-box homes by young homebuyers and investors, industry observers said.

Demand for cheaper small flats would continue to rise, they said, since Hong Kong home prices have remained buoyant despite the government's introduction of new stamp duties.

"Building more small flats will become a trend, as they are sought after by younger home seekers and long-term investors," said Patrick Chow Moon-kit, head of research at Ricacorp Properties.

A Midland Realty survey showed that land that had been sold in the past two years and designated for building small flats would supply 12,400 units over the next few years.

Upcoming new home sales include those at Sun Hung Kai Properties' 968-unit The Wings Phase 3 in Tseung Kwan O, which will offer about 200 small units of 334 sq ft to 360 sq ft. The official launch date has not yet been set.

Chow said that the market's attention has turned to smaller flats. He noted they were being sold for record prices in the secondary market and were commanding high rents per square foot.

A case in point was a 225 sq ft unit at a new project, The Avery in Kowloon City, which has been leased at a monthly rent of HK$14,000, or HK$62 per square foot - which is higher than in Mid-Levels.

On Monday, a 327 sq ft two-bedroom unit at City One in Sha Tin was sold for HK$4 million, or HK$12,400 per square foot. It was a record price per square foot for the development.

Chow also attributed the popularity of small flats to the tightening of mortgage lending.

Under Hong Kong Mortgage Corporation's mortgage insurance scheme, buyers of flats below HK$4.5 million could receive mortgage loans of up to 90 per cent of the flat's value, capped at HK$3.6 million, while for flats priced between HK$4.5 million and HK$6 million the maximum loan-to-value ratio is 80 per cent, capped at HK$4.8 million. For flats priced between HK$7 million and HK$10 million, the maximum ratio is 60 per cent, capped at HK$5 million.

Since the government doubled the stamp duty for the purchase of a second or subsequent home, buyers of such flats have to pay stamp duty of 1.5 per cent, as against HK$100 previously, for a property priced at HK$2 million or below; 3 per cent, from 1.5 per cent previously, for one priced between HK$2 million and HK$3 million; and 6 per cent, from 3 per cent previously, for a unit priced at between HK$4 million and HK$6 million.

"New homes being offered in the price range of HK$4 million and HK$6 million registered the fastest sales response because of the lending policy. Properties exceeding HK$7 million will require a higher down payment," Sino Land associate director Victor Tin Sio-un said.

Sino Land has sold 95 units at Park Ivy - a joint venture with the Urban Redevelopment Authority in Tai Kok Tsui - sized between 256 sq ft and 321 sq ft.

Midland said the number of secondary residential market transactions for homes worth HK$5 million or below fell to 3,479 last month after hitting a first-half high of 3,524 in May.