Hong Kong Apartments set for size Increase

Hong Kong apartments are notoriously small. However it seems that the much talked about micro-apartments of Hong Kong have gone past their peak in demand. The buyers can now afford bigger homes, thanks to the first ever mortgage entitlement relief in over a decade. This has resulted in developers dealing solely in the smallest category of residential property to leave the market.

According to the SCMP Rykadan Capital, who made HK$390 million worth of sales from their project, “The Paseo” at Jordan, Hong Kong stated that micro-apartments don’t provide the best investment option. The developer who sold 66 units built at a site as big as a basketball court further added that these homes take the first and the biggest hit from any property market drop.

Houses falling below 200 sq feet or 18.6 sq meters are categorized as micro-apartments. William Chan, the Chief Executive and Chairman of Rykadan said that because of the above reasons, despite having done good business with “The Paseo” in 2015, they chose not to develop any more similar projects. The builder has chosen to construct office buildings instead. He added that although there was rise in demand during 2015, the present market situation makes them the most vulnerable.

The world’s costliest property market for almost a decade has finally stumbled this year mainly because of a combination of rise in supply of Hong Kong apartments, political turmoil and continued trade war between China and US. The increased supply of residential properties is caused by the government’s decision to levy vacancy tax on completed and yet vacant Hong Kong apartments.

The JLL capital market’s senior director, Henry Mok said that with an increased purchasing power due to higher entitlement to mortgage loans, the fresh buyers are looking for bigger homes. He added that the developers have started moving away from the micro-homes market and the results will be evident starting from 2022.

The impact is already visible as only two of the smallest Hong Kong apartments, measuring 128 sq feet in the T-Plus building located in Tuen Mun could find buyers last November. Stan Group and Jiayuan International, the project developers were forced to cut down the prices by over 38% this July. A 245 sq feet Hong Kong apartment in the Parkes Residence in Jordan was resold at a loss of 30% on the price at which it was purchased five years ago. With a depreciation of HK$1.24 million, this price was also a record low for the past three years.

Rykadan is presently constructing two offices in Wan Chai and Wong Chuk Hang. The offices are scheduled to be sold or leased in second quarter, next year. Wan Chai has been affected by protests and the developers, who’re investing HK$1.4 billion in about 50,000 sq feet gross floor area are likely to get about HK$20,000 per sq foot. At around 100,000 sq feet of gross floor area, the Wong Chuk Hang office complex is mush bigger and is likely to be sold at HK$30,000 per sq foot with an investment of HK$3 billion.

The Midland IC&I, which is one of the biggest property agencies in Hong Kong have reported that office rents in the city might plunge by about 20% if there’s a 2% rise in unemployment. An example of this reduction in office rents is the 3.857 sq feet office in Bank of America Tower located in Admiralty. It’s been rented at HK$58 per sq foot last month, which is around 33% lower than what the owner had asked for and is the rock-bottom rent in the tower for over three years.

The Midland IC&I Chief Operating Officer and commercial department’s director, Eric Ong stated that the grade A offices located in Sheung Wan have been sold at 8.9% discount last month. At HK$25,000 per sq foot, the offices got sold at three year low. He further added that owners of office properties have almost given in to the lowering prices and have started offering about 30-40% discounts to attract buyers.