Saturday, 24 December 2016

When Will it Stop?

That's what 50 sq ft of space looks like -- could you live in a space like that?
Just when we thought flats couldn't get smaller, a developer in Hong Kong has done so.

When completed in September 2018, Chun Wo Property Development TPlus apartments in Tuen Mun will have flats that start at 128 square feet.

How much space is that?

After deducting for the balcony, bathroom and kitchen, that only leaves 50 sq ft of living space.

To put that into even better perspective -- 50 sq ft is smaller than an average parking spot.

Ironically the parking spots at 134 sq ft are bigger than some of the actual flats.

Could this not be more wrong?

But people in the real estate industry don't even bat an eyelid, saying developers could make even smaller flats if there is a market for them.

"History tells us that when developers or owners rush to launch mini properties, regardless of whether they are flats, office or shop units, that's sending out a message that capital is drying up, says Joseph Tsang, JLL's managing director and head of capital market who has been in the industry for three decades.

"Simply put, there are fewer buyers out there with the money" to afford apartments of decent, normal sizes," he said.

Most of the buyers of these shoe box flats are investors who rent them out to university students and fresh grads getting jobs, and it's the ones from the mainland who are willing to pay rents a year in advance.

It's a pretty good deal for landlords, not only getting the money in hand in advance, but also the yield is about 6 to 7 percent per year.

However, if the flat is not located near the city centre, the resale value is limited, because fewer potential homeowners would consider making such microflats a permanent home.

Another interesting fact is that average flat prices are a record 19 times the gross median income, according to a January survey by US-based Demographia, which defines any region with median income multiple higher than 5.1 as "severely unaffordable".

This demonstrates how prices in Hong Kong have outpaced income growth, making decent-sized flats out of reach of average income earners. As a result, people either have to buy small, buy old or far from the city centre.

In 2013 the Hong Kong government doubled the stamp duty on second-time home owners and last month it set the standard rate at 15 percent, again making buyers more interested in smaller flats as the tax decreases with the size of the floor space.

When will the government see that these tiny flats are inhumane to live in? Or is it too busy counting its takings from stamp duties to notice? Making Hong Kong more and more unaffordable is not a healthy way to run a city.

Most of the buyers of these microflats are investors anyway and not first-time home owners, so developers aren't really fulfilling market demands.

Government officials should really see what a 128 sq ft flat looks like and could they picture themselves living in one?

The same goes with the MTR during rush hour.

They really are oblivious to the reality of the average Hong Kong resident.

It's time to put an end to inhumane living spaces.

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