Hong Kong’s property mania inflates prices of even the tiniest flats, putting affordability beyond reach for most first-time buyers

The price of new flats smaller than 200 square feet rose to HK$25,512 per square foot in the first nine months, according to Midland Realty’s data
That made the smallest flats more costly than the typical Hong Kong abode, cheaper only than luxury homes bigger than 1,000 sq ft

Hong Kong property

Sandy Li

Published: 8:30am, 19 Oct 2021

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A real estate bull market in Hong Kong, the world’s most expensive major city for 10 consecutive years until 2019, has trickled over to inflate the prices of even the smallest habitable homes.

The average cost of new micro-apartments, or flats smaller than 200 square feet (18.6 square metres), rose to HK$25,512 per square foot in the first nine months of 2021, according to Midland Realty’s data. That made the smallest homes more expensive than the HK$21,680 per sq ft average price of the typical Hong Kong flat of between 400 and 600 sq ft, and only cheaper than the HK$30,460 average price of luxury apartments bigger than 1,000 sq ft.

The bar chart of home prices of various sizes looks like a U shape with extended bars on both ends, because “Hongkongers with limited budgets can only [opt] for smaller lump sum payments,” which explains why the smallest flats sell out first, said Midland’s chief analyst Buggle Lau. “No one wants to live in tiny flats” if they had a better choice, he said.

The dismal state of housing underscores the challenges confronting Hong Kong’s policymakers as they grapple with ways to make housing more affordable, especially for young families, school leavers and other people struggling to get on the first rungs of the property ladder.

The average price of micro-apartments jumped 23 per cent last year from 2019, before retreating by 1.7 per cent in the first nine months of 2021, Midland’s data showed. That gave the typical 200 sq ft Hong Kong nano flat a price tag of HK$5.1 million (US$655,000), about the same as a 544 sq ft studio in southeast London, according to the property website of Galliard Homes.

Henderson Land Development, founded and run by the family of Hong Kong’s second-wealthiest tycoon, built one of every two micro-apartments sold in Hong Kong in the first nine months, or 115 out of 230 of these homes, according to Dataelements, which tracks sales in the primary residential market. Some of its projects, such as the Cetus Square Mile project in Tai Kok Tsui, were popular, helping the developer sell five of the tiny flats for a nine-month record price of HK$31,200 per sq ft.

Hong Kong’s government plans to stop developers from building more micro-apartments, after the Hong Kong and Macau Affairs Office director Xia Baolong asked local authorities to address the city’s chronic housing issues and get rid of cramped living space by 2049.

Cramped space was a “pain point for society,” Hong Kong’s Secretary for Development Michael Wong Wai-lun acknowledged on October 8. While Wong did not specify the minimum size of what acceptable housing should be, he took note of suggestions that start at 200 or 210 sq ft.

Local authorities would need to increase the plot ratio of every plot of government land released for sale to turn into housing, for living space to increase. The city’s tiniest new home measured 123 sq ft in 2018, while the city’s poorest residents had 50 sq ft per person in average living space, according to a non-government organisation.

“The government can impose the minimum size of flats to be built on land sale document to Hong Kong government to ensure the improvement of living standard,” said Leo Cheung, adjunct associate professor at the University of Hong Kong’s real estate and construction department.

Some projects are headed in the right direction. CK Asset Holdings’ HK$4.95 billion winning bid in May 2020 for a plot of land in Kwun Tong’s Anderson Road area came with the condition for the developer to build at least 1,000 homes, measuring no smaller than 250 sq ft, according to the land-sale document.

This article appeared in the South China Morning Post print edition as: Bull run inflates prices of tiny flats