If you are a bread master, what would you do if you have limited flour but many customers?
The answer: make the bread rolls smaller – and sell them faster.
Now substitute the bread with homes, and the flour with land supply, and you have a picture of Hong Kong’s current housing market and the emerging trend of nano flats in the city.
According to Jones Lang LaSalle, homes measuring less than 200 square feet will see 3,240 units completed in Hong Kong between 2019 and 2021, marking an increase of 58 percent from the 2,050 such units that were built from 2016 to 2018.
By 2020, the so-called nano units are expected to account for about 6 percent of the total number of new homes in the world’s most expensive housing market.
In other words, one in 16 units built in Hong Kong will be tiny flats.
As of now, the proportion of nano flats is said to be around 4 percent, with the ratio having doubled from the level recorded during 2014 to 2016.
Crazy home prices have left many people with no option but to settle for cubby holes in terms of living space, but there are other factors as well that have prompted a rush toward such units.
Readers would be aware even a Miss Hong Kong, Louisa Mak Ming-Sze, opted for tiny units at a property sales event earlier this month.
Mak and her family bought three units at the T Plus residential project in Tuen Mun, with their purchase decisions believed to have been influenced by financing requirements and stamp duty rules, among other factors.
Nano units, where some of them are just about 125 square feet or roughly that of a car parking space, may be viewed as ideal for an ascetic with a minimalist lifestyle, but they come with some hazards.
Denis Ma On-ping, head of research at JLL Hong Kong, has pointed out that there are certain risks to investing in nano flats. During a sector downturn, nano flats could underperform the broader property market.
Nano flats are generally priced higher per square foot, thanks to the lower overall entry fee. However, that doesn’t mean that developers can get away with over-the-top costing.
At T Plus, which is being jointly put up by Jiayuan International and Stan Group, the developers only managed to sell two units at the first launch last year. But after a 30 percent price cut last month, they managed to sell almost all of 344 units in one go in July.
What this shows is that the basic economic rules — of demand and supply, and fair pricing — apply to even the small-home market.
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