Size matters: developers churn out ‘microhomes’ to meet greater demand for tiny apartments as prices continue to rise
Rating and Valuation Department says developers in Hong Kong have built more microflats – 215 sq ft or smaller – in the past four years than any other category of home
Hong Kong’s property market has evolved over the past few years, with real estate prices soaring 150 per cent since 2010 – while home sizes have dramatically shrunk.
Runaway prices seems to have led to the age of “microhomes”.
Property experts and analysts say that this trend of small apartments is expected to continue as more developers embrace a strategy of building tiny homes to take advantage of the rising demand for these types of property, ranging from less than 200 sq ft to more than 400 sq ft.
According to the Rating and Valuation Department, developers in Hong Kong have built more microflats – 215 sq ft or smaller – in the past four years than any other category of homes.
The number of private flats of less than 215 sq ft rose from 81 in 2013 to 206 within two years, according to the Rating and Valuation Department – a 154 per cent increase. No flats that small were built in 2012.
In September last year, Henderson Land Development launched the Seven Victory Avenue development in Ho Man Tin, setting its own record with each unit measuring a mere 161 sq ft.
In October, a report published in this newspaper said that Emperor International Holdings planned to convert a 21-storey commercial building in Happy Valley into a 68-unit apartment complex. Each of the units will measure about 200 sq ft, inclusive of an open kitchen and bathroom, with a net living area of 61.4 sq ft.
Also in October, Swire Properties released its renovated residential building Star Studios, with units from 142 sq ft upwards, for lease.
Henderson Land’s One Prestige’s 163 sq ft units in North Point sold for HK$3.87 million, or HK$23,742 per square foot the same month. Likewise a 165 sq ft unit at Mont Vert in Tai Po changed hands for HK$2.3 million, or HK$13,939 per square foot, in early August, according to the Land Registry’s data.
The buyer, who paid HK$1.4 million in 2014 for it, made HK$910,000 in gross profit from the sale.
The price growth of small apartments has outpaced other categories of residential property, rising 8.7 per cent in the first three months of 2017, according to data from various property consultancies.
The emergence of small or microapartments can be traced to the government’s property policies. In 2011 and 2013, the government included size restrictions in the land sale conditions of several residential sites to boost the supply of small- and medium-sized flats.
Denis Ma, head of research at real estate agency JLL, said the government’s property cooling measures were another key factor for the city’s shrinking flat sizes.
Stamp duty was raised for the second time in three years, to 15 per cent, last November in a bid to curb speculation and rein in soaring real estate prices.
“The higher stamp duty means transaction costs have increased and people have to save up a lot of money for transaction costs and not for the property itself,” Ma said in a recent interview.
“It’s really about budget, and the reality is that not that many people have much spare change sitting in their back pockets. Developers are building what they believe they can sell in the market.”
Vincent Cheung Kiu-cho, executive director of valuation and advisory services for Asia at Colliers International, was quoted as saying that demand by first-home buyers is spurring developers to build small flats.
“The small-sized units can yield a higher unit price,” he said.
Hong Kong home prices – which have surged 159 per cent since 2008 – began to fall after reaching a peak in September last year, but soon bounced back to within sight of record levels last month.
According to Simon Smith, head of research at Savills, property prices have rebounded 20 per cent since 2013. This year, he expects prices to rise 5 to 10 per cent and the focus to remain on the primary market.
He says developers are offering more competitive prices and incentives. Demand from local high-net-worth investors would continue to fuel the prices, while mainland buyers would continue to snap up super luxury developments, he predicts.
Meanwhile, CK Property achieved record prices for its latest project, Harbour Glory in Hong Kong Island’s North Point.
CK Property was not deterred by mounting pressure on the government to roll out tougher cooling measures, and announced that the first batch of 76 homes at Harbour Glory, ranging from 432 sq ft to 1,595 sq ft, would go on sale from HK$10.3 million to HK$64.2 million, or
HK$23,600 to HK$40,255 per square foot after discounts of up to 34 per cent.
The cheapest Harbour Glory flat is a 437 sq ft one-bedroom unit on the eighth floor, which is being offered for HK$10.3 million, or HK$23,600 per square foot after discount.
Likewise, Sun Hung Kai Properties sold all 312 units of its Cullinan West development in one weekend and raised the price of the next batch by 9 per cent, as homebuyers appeared unfazed by the recent interest rate rise.
Victor Lui, deputy managing director of Sun Hung Kai Properties, said that the sale generated revenue of HK$8 billion for the property group.