Hong Kong developers to build larger flats as tiny homes lose appeal amid increasing public housing supply

Hong Kong developers are having to rethink their approach to tiny flats, as the strategy of building low-priced homes no bigger than a car park space is being squeezed by the government’s commitment to increase the supply of public housing, according to commercial real estate service provider JLL.

During her policy address on October 10, Chief Executive Carrie Lam Cheng Yuet-ngor pledged to increase the proportion of public housing by adjusting the target public-private housing ratio for land supply to 70:30 from 60:40.

“The increase in subsidised housing may sap some of the demand out of the lower end of the private housing market. It could affect the demand for nano-flats in more remote locations. As a response, we believe developers are likely to alter their projects to incorporate larger and more liveable flats with sizes ranging between 400 and 600 square feet and two-bedrooms layouts targeting middle class buyers,” Henry Mok, senior director of capital market at JLL, said.

However, he said that demand for larger homes depends on whether the government would relax restrictions on mortgage lending to ease the down payment burden on homebuyers.

Local developers prefer to build micro flats, in layouts under 200 sq ft, partly because the Hong Kong Mortgage Corporation allows a loan-to-value mortgage of 90 per cent on homes worth HK$4 million (US$509,900) or less. For homes cost more than HK$6 million, buyers need to make at least a 40 per cent down payment.

In September, the average house price in the city was HK$13,561 per sq ft, which means a 400 to 600 sq ft flat will cost about HK$5.4 million to HK$8.2 million, according to Midland Realty.