14 August 2017 - Amid seemingly ever-soaring Hong Kong property prices, there is a rising trend of developers building tiny “nano flats” spanning less than 200 square feet as more affordable housing options for desperate Hong Kong home buyers. In a similar vein, some companies are also attempting to present more economical options in the rental market.
Synergy Biz, a team of professionals with backgrounds in property and architecture, is looking to provide solutions for youth accommodation. The company announced its upcoming co-living project in Mong Kok would be open for lease in September. Given the costs, co-living spaces might be the only real option for young adults to meet their housing needs. While nano flats, subdivided units and co-living spaces are meant to alleviate Hong Kong’s housing crisis, there are two sides to every coin.
How Do Nano Flats Perform in the Property Market?
Shrinking homes are the trade-off for less costly flats when local residential prices remain at record levels. Although the number of nano flats constructed has nearly tripled since 2013 due to popularity and housing prices varying from district to district they remain a very small proportion of new supply entering the housing market. Among the new units completed in 2016, 206 of them were considered nano flats, accounting for 1.4 percent of the total of 15,595 new homes, or less than 0.1% of the overall housing inventory. The 128 square foot apartments in the T Plus development in Tuen Mun, which are smaller than a standard car parking space, best describe how minuscule these nano flats can be. For local home buyers with limited budgets, a smaller lump sum amount will always be a higher priority than the unit size. This contributes to the boom of micro apartments even if the rate per square foot is 19 to 29 percent higher than the market average.
OKAY.com CEO Joshua Miller discussed micro (nano) apartments on Bloomberg in 2014, when the Mont Vert micro-flat development was first released. In that interview, Mr. Miller explained that while micro-flats fulfil a certain niche, it was unlikely to be the start of a significant trend given the appeal to a limited target market and specific economic conditions needed for micro/nano apartments to be financially viable. More recently, the chief analyst of Midland Realty held similar reservations about purchasing nano flats since people will not settle in a parking-space-like apartment forever. Once property prices adjust, nano flat owners might be susceptible to the risk of declining demand for tiny flats.
Can Subdivided Flats Ease High Housing Prices?
Subdivided units are another by-product of skyrocketing rents in Hong Kong, which squeeze people into smaller subdivisions of an apartment in order to maximize the tenant count. According to the Census and Statistics Department, about 200,000 people lived in 88,000 subdivided flats in 2015, of which 65.2 percent stayed in units measuring from 75 square feet to 140 square feet. While the rents of these partitioned cubicles might seem lower than other homes, the rate per square foot is double that of private flats in the same districts. From 2014 to 2015, rents of subdivided flats jumped 13.6 percent, whereas rents of homes in the private sector rose by 7.4 percent. Compared with nano flats, subdivided units were typically in much worse condition as most of these incredibly overcrowded cubicles are found in old tenement buildings, causing serious safety concerns in case of fire or other emergencies.
Are Co-living Spaces a Housing Solution for the Younger Generation?
While co-living spaces have yet to become a prevalent housing alternative in Hong Kong, recent years have witnessed more experimental co-living projects. For instance, Campus Hong Kong in Tsuen Wan, SynBox in Hung Hom and the upcoming Bibliotheque in Mong Kok. The concept was to strengthen the sense of community by sharing a larger kitchen and more amenities with other residents, while enjoying a decent and relatively spacious room compared with nano flats and subdivided units. About 30 percent of the Bibliotheque spaces have already been reserved by a local university as student accommodation, which could be read as promising demand for co-living spaces in Hong Kong. That being said, privacy is compromised when sharing a flat with strangers, which is a prime concern for more mature tenants with established lives. In this respect, co-living spaces might only be appealing to youth and international students, serving a limited population of renters in Hong Kong.
Both nano flats and subdivided units have proven one point – the smaller the unit, the higher the price per square foot. Yet, average home buyers and tenants can only go for what their budgets allow. Consequently, tiny room sizes and seemingly unreasonable rates per square foot are tolerated for a smaller lump sum, which contributes to the growing demand of these micro apartments. While co-living spaces are on the rise in international markets, experts wonder if developers would invest in co-living spaces when flats spanning less than 200 square feet do have marketability in Hong Kong’s real estate sector. Co-living spaces are a nice idea, but their impact on Hong Kong’s housing crisis has yet to be meaningful.