Concrete AnalysisSmall flats cannot solve the long-term housing needs of Hong Kong

Developers in Hong Kong have always been very responsive to market changes. Building smaller residential flats is one of their recent reactions to market trend, but it is dubious that building too small flats is a sustainable way to satisfy the long-term housing needs.

The Census and Statistics Department projected that average household size would decrease from 2.9 to 2.7 persons in the 30 years following 2014. The projection was based on the demographic trends of increase in never marriage rates and divorce rates, as well as decrease in fertility rates and improvement in life expectancy. In tandem with the smaller household size, the proportion of smaller households (i.e. one to three persons) was expected to grow from about 68 per cent in 2014 to about 69.9 per cent in 2019 and about 71.4 per cent in 2024.

This trend in the demographic fundamentals logically leads to the expectation that the demand for smaller housing units will go up.

Apart from the fundamentals, the measures imposed by the government to cool down property prices have also indirectly pushed up the demand for the smaller units.

People in Hong Kong always aspire to own their flats, to climb up the ownership ladder and improve the quality of life by living larger and newer. These aspirations have been the key driving forces of the economic growth and high productivity of the local workforce. People still strive to buy flats despite affordability coming down alongside the surge in property prices in the past few years. Though the price to income ratio has increased from 15.27 to 15.60 in the last three years according to JLL, the aspirations to buy flats have become even stronger rather than lesser.