Hong Kong property

'Shoe box' rents up as first-time buyers hang fire

PUBLISHED : Wednesday, 12 December, 2012, 12:00am
UPDATED : Wednesday, 12 December, 2012, 4:07am

Rents for "shoe box" flats in urban areas have risen rapidly recently and in some cases now exceed rents fetched in blue-chip housing estate Taikoo Shing.

Driving the sharp increases, say agents, is a growing number of prospective first-time buyers who are choosing to delay their purchases in the expectation that prices will fall due to the October property cooling measures.

Demand for small flats, they say, is particularly strong among singles and newlyweds.

A 367 sq ft flat in a newly-completed single residential block, Upper 18, in Sai Wan Ho, was leased last week for HK$15,000 a month, or HK$41 per sq ft - 28 per cent higher than rents of about HK$35 per sq ft charged in Taikoo Shing.

In North Point, a 471 sq ft flat in one-year-old estate Lime Habitat was leased last month for HK$18,800 per month, or HK$40 per sq ft. And in Shau Kei Wan, a 300 sq ft flat in the 30-year-old Tai On Building close to Shau Kei Wan MTR station was rented out at HK$10,000 a month, or HK$33 per sq ft.

Leo Leung, senior sales manager at the Shau Kei Wan branch of Centaline Property Agency, said: "The October property measures raised expectations of a downward adjustment for home prices. People who wanted to buy properties are now leasing instead."

The expectations of those delaying their purchase decisions so far appear to be well-grounded. The Centa-City Index compiled by Centaline Property Agency, which tracks prices at 100 housing estates across the city, showed that home prices dropped two per cent over the week ended December 2.

Flat prices began trending downwards in the middle of last month, halting a sustained rise since January which had lifted year-to-date prices by about 20 per cent. The upward trend was reversed after the government announced a 15 per cent stamp duty on corporate buyers and non-permanent residents primarily to cool the overheated property market in late October.

"Rental for these tiny flats have also shot through the roof because of small lump sum involvement and limited supply," said Leung.

Patrick Chow, head of research at Ricacorp Properties, cautioned that the rise in rentals would present a challenge to young couples hunting a home.

A 675 sq ft flat at Taikoo Shing now fetched a rent of around HK$21,000 per month, or HK$35 per sq ft, he pointed out.

"It would be tough on a young couple with a household income of about HK$40,000 month if they were forced to spend around half of their disposable income on rent," he said.

Leung said just 20 small flats were available for rent this month, down from an average of 30 a month over the past year.