The Surging Trend Of Building Ever Smaller Homes By Hong Kong Developers: Buyers, Take Heed!
Hong Kong developers were known for building larger flats in the past, but right now, they’re rushing to building ever tinier homes. There is an old-age saying that “small is beautiful”, which suggests the reason why some people choose smaller homes; but in the case of these Hong Kong developers who have now adopted the idea of building ever smaller apartments, this saying could be rephrased by investors as “small is ugly”.
Hong Kong home buyers may indeed not have another option than to choose small flats due to their tight budgets, and the significant increment in prices in the past year. It is understandable that the major reason buyers choose these smaller homes is due to their lower affordability. However, there has been a strong admonition by industry experts that buyers should be highly cautious of these small flats because the seeming appearance of their lower affordability is deceptive and can lead to financial calamity on the part of the buyers. There is a huge possibility that a sudden rise in interest rates is around the corner, and if this happens (which could very well happen as early as the coming month, as indicated in comments by officials of US Federal Reserve), buyers will bear the worst hit.
Despite knowing this, some of these largest Hong Kong developers are not deterred. They have continued the business of building tinier apartments due to their high demand and rapid growth. An example of these developers is Handerson Land Development, the third among Hong Kong’s largest developers. Recently, this company revealed their One Prestige project, expected to become the tiniest unit in Hong Kong Island in August 2018 when it is completed. It is a 33-storey apartment located in North Point, at Yuet Yuen Street. Its floor area is measured 163 sq ft, and every studio unit includes a 60 sq ft bathroom and also serves as a 20 sq bathroom, an open kitchen, and a dining area. The price of this building has not been made known.
It is believed that the One Prestige project is in fact not the smallest unit size. Rather, the smallest unit sizes are the AVA62 flats located in the north of Victoria Harbour in Kowloon, Jordan. Built by Wisdom Gaining, each of these apartments measures 153 sq ft, comprising a 21 sq ft balcony. Each square feet of the AVA62 is sold for about HK$20,000, therefore the average unit costs about HK$3 million.
As Hong Kong’s smaller flats are being sold faster than larger units, it has been projected that about 5000 small flats will be completely built annually until 2019. This unhealthy development is a real fast growth, as it is almost three times the average in the last decade.
As this trend surges, there are fears that the supply of new small apartments may soon exceed the demand in the market. And as this happens, a lack of space for living in Hong Kong will be further aggravated. All stages of home ownership should be catered for, rather than being just about the size. With this speedy growth of small units of apartments and lower affordability, these premises may become the future’s ghettos, and potential up-graders will have reduced alternatives, thus confining several households to their present premises, against their will. Since this trend is growing due to lower affordability on the part of the buyers, a good solution is for banks to loosen their mortgage lending for larger size apartments.
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