A 121 square foot public housing ‘studio’ flat sells for record HK$1.93 million

Tiny public housing units in Hong Kong, known locally as “nano flats,” are selling like hot cakes despite record high prices, as the city continues to struggle to create enough affordable housing.

And although some of these homes are smaller than a car parking space – less than 135 square feet – agents warn prices are set to rise even higher, due to limited supply.

Examples of some of the crazy prices being paid for tiny spaces in the city include a 121-square-foot studio unit in the 29-year-old publicly-owned Oi Wo House on Tai Po’s Tai Wo Estate, which sold for HK$1.93 million (US$247,435), or about HK$15,950 per square foot.

The per-square-foot price of the nano flat broke the previous record set by a transaction at the private Tak Tin Estate in Lam Tin, where a home was sold at HK$15,890 per sq ft last September.

New flats at the luxury Double Cove in Ma On Shan, for example, are being offered by Henderson Land Development on the private market at roughly the same price – new prices per sq ft there start at HK$16,000.

Billionaire Li Ka-shing, Hong Kong’s richest man, even entered the nano flat debate on Thursday, during the annual dinner of the global conglomerate Cheung Kong Hutchsion Holdings and Cheung Kong Asset Holdings.

He said demand for tiny flats remains, but given the speed at which they are being constructed, he would not be surprised if they became oversupplied.

Looking ahead, Li said he expects to see a positive property market outlook this year, but still refused to be drawn on when he might retire.

“I will make an announcement when I’m retired,” the 89-year-old said.

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Thomas Lam, head of valuation and consultancy at Knight Frank, said: “As home prices in the private sector rise beyond the affordability of the general public, those who cannot afford a private home are now flocking to buy public housing units, despite their often poor quality.”

And Lam expects the trend of public flats selling for jaw dropping prices to continue.

Including deals for housing, car park spaces and commercial properties, Hong Kong’s property market was worth HK$726.5 billion in 2017, up 36.3 per cent from 2016 – the second highest rise on record, said Centaline Property Agency.

During those 11 months, there were 136 cases of private nano-housing transactions worth more than HK$3 million each, compared with 52 cases in 2016.

Vincent Cheung, a deputy managing director for Asia valuation and advisory services at Colliers International, said user demand remains hot in the seven-million-population city.

“It is impossible to buy a new flat for under HK$2 million in the private sector,” he said.

Higher prices of such units in the secondary market are also being driven up, because nobody earning more than $27,050 per month or who has more than HK$506,000 in assets for a family of four, is eligible to apply for public rental housing.

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Owners of flats valued at or below HK$4 million can receive a mortgage loan of up to 90 per cent through Hong Kong Mortgage Corporation’s schemes, and that lower lump sum requirement has also drawn big buying interest from investors, further driving up prices.

“The monthly rent of a nano flat in Tai Po can be as high as HK$6,500, which translates to a 4 per cent return,” said Danny Lo, an agent at Century 21 in the district.

“There are no statistics on the number of public housing units available for purchase in the secondary market,” he said.

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Ken Chung, a former public housing tenant, said his family bought a public housing unit at only HK$571 per square foot, back in August 2005.

The same 490 square-foot flat, which they bought from the authority for only HK$280,000, was in Tung On House at Lei Tung Estate.

He said they will now never consider selling it.

“Even if you sell it, you will have to rent somewhere else for a living,” he said. “And it is important to have a stable shelter for my parents.”

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