The End of Microflats?

Can you live in a space the size of a parking space and stay sane?

Finally the trend of squeezing into inhumane spaces is ending.

Some developers who got onto the bandwagon of offering microflats are now left holding the bag, as many have several units that still haven't been sold and buyers are demanding more space for their buck.

A staggering ratio of two of every three homes built in Hong Kong since 2016 were built this year, of these 976 units, 461 were still unsold, most of them microflats.

The trend started in late 2014, with demand so high and not enough flats available, some developers started carving up big flats and making them less than 200 sq ft and charging up to 14 percent more when another block of flats were released into the market.

Flats in Tuen Mun that were subdivided even smaller

The highest price for a microflat was set this past May when a 190-sq ft flat from developer New world Development in Sai Ying Pun was sold for HK$6.52 million, or an eye-watering HK$34,315 per sq ft.

And can you believe that one developer was thinking of making flats less than 100 sq ft and selling them for HK$1 million in Tuen Mun, but then logistically it was impossible for construction workers to be able to physically fit the flat with all the amenities necessary.

In the end the developer squeezed out 356 units in a 19-storey building, which meant an unbelievable 29 units per floor at 130 to 140 sq ft each -- smaller than a standard parking space at 134 sq ft or a 20-ft shipping container at 158 sq ft.

Another developer, Filipino tycoon Lucio Tan's Eton Properties was ordered by the Hong Kong Lands Department to stop leasing co-living spaces at the prestigious address of 53 Shouson Hills.

18 luxury flats at 53 Shouson Hill were subdivided into 500

Eton had converted three luxury properties into more than 500 subdivided units, measuring between 60 and 1,200 sq ft with rent starting at HK$4,000 a month. The authorities ordered Eton to return all 18 flats to their original design.

One young couple, Joshua Lin, 27 and his wife, bought a tiny 160 sq ft flat in North Point. He took out a mortgage to pay for half of the HK$4 million cost of the flat, his parents helped him with the remainder. His mortgage payments are HK$8,500 a month.

"It's a challenge to fit a bed and a wardrobe into such a tiny apartment," Lin said, where the living room measures 97 sq ft. While the one-bedroom flat should be turned into a studio, it's worth more if it has a bedroom...

It's already a challenge for one person to live in 160 sq ft, let alone two people. Is this what Chief Executive Carrie Lam Cheng Yuet-ngor had in mind as a way for young people to establish their lives in Hong Kong?

It's enough to depress and frighten them away from the prospect of trying to earn enough to get a bigger flat, and to have children.

Owning a micro flat because that's all they can afford is hardly something to aspire to...

Is the Micro Flat Boom Over?

T-Plus in Tuen Mun had trouble selling its micro flats today

Is this the beginning of the end of micro flats in Hong Kong?

Back in March, demand for these tiny flats around the same area as a standard parking space (134 sq ft) garnered from HK$3 million to a whopping HK$7.86 million.

Now property developers are having trouble selling them. Today only two of the 73 units on offer at the T-Plus project in Tuen Mun were sold. The starting price for 130 sq ft was HK$2.85 million.

The plans show a number of tiny flats on each floor

With no interested buyers, the sales launch closed earlier.

One real estate agent with Midland said the result was "the worst in recent times", prompting the optimistic thought that perhaps micro flats are becoming passe.

However there's still more coming onto the market -- at least 2,100 will be completed between 2017 and 2020, or 510 units every year.

Part of the reason for the cold reception is that Hong Kong's long period of low mortgage rates ended in September, rising in line with the US Federal Reserve's tightening monetary policy. There was also the proposal to impose a vacancy tax that stopped developers from hoarding completed property to further raise prices.

As a result property prices started dropping from September, and could drop as much as 15 percent, while JLL has forecast it could plunge by as much as 25 percent if the trade war between China and the US continues.

Twin Regency offering more space for the same price

The other factor is that while T-Plus is offering flats at 128 sq ft for HK$2.85 million, a slightly bigger one at 299 sq ft at Twin Regency in Yuen Long could be had for the same price.

So -- wouldn't you be a fool for not wanting to get the latter?

And we hope this is the end of micro flats because it is mentally and physically unhealthy to be living in such a tiny space.

Can You Live in 123 Sq Ft?

How small a space can you live in? One developer thinks it's 123 sq ft

We talked about incredible-shrinking flats yesterday and now they're getting smaller. A developer, Wing Kwok Enterprises, will be building a 27-storey residential block in Sham Shui Po where the smallest unit will be 123 square feet.

To put that into perspective, that's smaller than a 20-foot shipping container, or an American-sized parking space.

"At that size, the unit will most likely feature only an open kitchen, and a shower room, which typically add about 10 percent of the total area," said Victor Lai Kin-fai, a managing director of Centaline Surveyors.

Why so small?

"The average square footage price of smaller flats will be higher than larger apartments, which will further encourage developers to build ever smaller units," he said.

Is it no wonder then, that 27 percent of Hongkongers don't expect to ever afford a home, which "definitely deserves everyone's attention," said Nerida Conisbee, chief economist of REA Group, a digital advertising firm that specializes in property.

REA conducted a survey of 1,003 respondents that showed another 16 percent of people have no plan to buy property at all because prices are beyond their reach.

Has Secretary for Transport and Housing Frank Chan Fan actually seen a microflat? Has he spent the night in one to find out first hand what it's like to live in such cramped conditions?

Hong Kong government officials really have no idea what the average Hongkonger goes through on a daily basis...

Incredible Shrinking Homes

How small a space are you willing to live in? Or rather you can afford?

The housing issue in Hong Kong continues to heat up. In the last day or so, there have been reports that there will be more and more microflats coming into the market in the next few years.

Last year there were 691 units on the market, over eight times more than the 79 in 2015; smaller flats between 215 sq ft and 430 sq ft jumped to 6,200 last year, from 2,056 in 2015. The Hong Kong government forecasts 6,852 private flats smaller than 430 sq ft will be completed this year, accounting for 38 percent of the overall supply of 18,130 private flats this year.

Tiny spaces leave people feeling claustrophobic and depressed

There have been calls to regulate the minimum size -- some of which are smaller than the dimensions of a jail cell here. Our Hong Kong Foundation that's run by former chief executive Tung Chee-hwa has estimated the average size of private flats completed between 2018 and 2022 would be 681 sq ft, or equivalent to five standard parking space -- an 18 percent decrease from the average of 833 sq ft in the past decade.

Researchers say the trend of building microflats getting smaller will continue. Developers say that's because there is a demand for them, especially from those buyers who want to finally own a home, but at what cost financially and in terms of mental health? How is a tiny cramped space good for one's self esteem? How many years will it take for them to pay off the mortgage?

Pro-government lawmaker Alice Mak Mei-kuen from the Federation of Trade Unions said the government needs to safeguard buyers' rights.

"I know that many buyers now feel regret after purchasing nano flats. Even if the government won't legislate a flat's minimum size, will you consider introducing guidelines about it?" she asked.

How long can someone live in a tiny space like this?

However, Secretary for Transport and Housing Frank Chan Fan said there was no need to regulate the size of flats because buyers wouldn't be able to afford bigger ones due to rising property prices.

"If we set out some guidelines stipulating the minimum floor area of a flat, it means that aspiring home buyers will face a minimum price for a larger unit. Will they be able to afford this [greater] minimum price? We have big reservations about this," Chan said.

Land supply, he says is the issue. Perhaps that's because the government is constantly pushing its agenda of reclaiming more land on Lantau that has received a lot of opposition because it disrupts the environment and the species that live in the area.

We've been calling for the government to put more effort into re-developing brown sites, but there hasn't been much in the news about it seriously looking into these areas. The sites may seem small, but they add up and it's the more sustainable way to go. And maybe it's time to stop the quota of allowing 150 mainlanders to settle here everyday? Just a thought.

It's time for the government to be more creative; blaming market demand is not the answer.

HK Housing Prices Continue to Soar

Can you live in a 209 sq ft home that costs US$1 million?

Just when you think property prices can't get any worse, they do.

A flat slightly bigger than a shipping container has been sold for HK$7.86 million (US$1 million), which is HK$37,651 per square foot. A shipping container is 165 sq ft.

The 209-square foot flat is located on Pokfulam Road in Sai Ying Pun, which is part of an 11-unit development built by Kowloon Development. So far the company has sold 60 percent of the flats at Emerald House that range from 209 sq ft to 310 sq ft and cost as much as HK$11.29 million.

The microflats are being built in Sai Ying Pun

And just as you are shaking your head in disbelief, the latest survey shows that 27 percent of Hong Kong people don't ever expect to own a flat. The survey by REA Group, a digital advertising firm that specializes in property, says of 1,003 respondents carried out by Nielsen, 16 percent have no plan to buy property at all because the prices are beyond their reach.

Home prices rose for the 22nd consecutive month in January. If the average Hong Kong person makes about HK$17,200 per month, it will take them 30 years of monthly income to afford a HK$6 million flat. That means not buying anything, let alone eating anything.

REA Group says this inability to afford housing leads to social issues like couples delaying marriage. And as young people can only afford tiny flats that minimizes the amount of stuff they can have in them, and living in tight quarters can also cause more friction between people. Also having to live in a small place long term is hardly good for one's mental health.

How much stuff can you squeeze into a microflat?

But that's the reality in Hong Kong -- the government isn't doing enough to step in to build social housing, or help young people get their foot in the door to help them towards owning a flat.

Financial Secretary Paul Chan Mo-po isn't doing much to help this segment of people, only homeowners with a small break of not having to pay government rates for a whole year. Whoohoo.

If he helped more young people move a giant step forward closer to owning a flat, perhaps there would be more optimism in the city -- that there is hope, that they can feel proud of being in the city and feel more welcome as residents.

However it seems the government doesn't have that kind of long-term thinking. It only wants to build an even bigger war chest... for what?

Paul Chan's Crocodile Tears

Does Chan seriously think we believe he's losing sleep over young people?

Our Financial Secretary Paul Chan Mo-po is so concerned about young people in Hong Kong that he's losing sleep over it.

In a Christmas Eve post on his blog, Chan said ever-increasing rents and property prices had imposed a heavy burden on Hongkongers and stunted the development of start-ups and entire industries. "It gives me sleepless nights and a low appetite," he said.

Recounting previous conversations with grassroots families and other locals, Chan said many residents, especially the young were under immense pressure due to stagnating salaries and long working hours despite Hong Kong having robust economic growth at 3.7 percent this year.

The youth feel left out in the city's economic development

Chan also noted there was a shortage of land for housing, offices, creative spaces and nursing homes.

"The government is making an effort to find land and explore solutions from every possible angle," he wrote.

But some of the suggestions have been controversial, such as developing some parts of the country parks which is currently illegal, and also making a 1,000-hectare artificial island east of Lantau.

Stop with the crocodile tears, Mr Chan.

If you were a rookie in Carrie Lam Cheng Yuet-ngor's administration, then maybe we would have a bit of sympathy for you, but you were previously Secretary for Development in Leung Chun-ying's cabinet AND you were discovered for owning several properties that had sub-divided flats and had land in your name in the New Territories where the government was planning to develop near there.

Housing is an urgent issue that needs to be addressed

And how can it only be now that he realizes how challenging it is for young people to establish their careers in Hong Kong if they don't have good connections or a lot of capital to start with?

If he isn't sleeping well then he should come up with some decent solutions to help young people get jobs that will move them up the economic ladder instead of being stuck in service positions, and find more land -- brown sites is something we have repeated constantly in this blog -- or the government should develop low-cost housing of its own so that there will be options other than luxury flats or micro flats less than 300 square feet.

This is the best financial secretary Lam could come up with?

When will HK Micro Flats Stop?

Can you imagine owning and living in a small space like this?

The Hong Kong government has hinted it can force developers to build bigger flats at any time, but doesn't seem to think now is the time to intervene.

Secretary for Development Eric Ma Siu-cheung said measures could be inserted into land sale conditions "at any time" if it was deemed necessary.

But he stopped short of any immediate action, saying the number of "nano flats" still represented a fraction of the city's housing and he was confident the market would correct itself.

Eric Ma seems to think micro flats are still OK in the market

"We are concerned about this [situation]," said Ma during a television interview. "We hope flats will not become too small. They are OK for one person to live in, but [not] for a family."

You don't say!

There are flats as small as 152 square feet going for about HK$20,000 per square foot, and the smallest homes measure at 61 square feet.

Surely these are already too small to live in? Or does Ma not know what it's really like to live in 152 square feet with all of one's possessions? If 61 square feet isn't small, then what is?

"Of course we will monitor the situation and, if necessary, we can list out in the land sale conditions, for example, requirements for a unit's minimal floor area and quantities," he said. "We've done this in the past too... if necessary, we can do it any time. It's not difficult."

How can people live in these small spaces long term?

So when will that be? When are they going to pull the emergency alarm and tell developers they have to create more humane spaces for people to live in?

For the government to say it's closely watching the situation isn't good enough. It's basically negligence in looking out for the well-being of its citizens.

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.

Justifying Microflats in Hong Kong

Not everyone is clamouring for a matchbox-sized flat in the sky

Hong Kong government officials are disconnected as ever from the rest of us 7 million people, and they still wonder why the Umbrella protests happened two years ago.

One of the gripes was that housing had become unaffordable. And what has happened since? Flats have become even more unaffordable.

Developers then hit on the idea of making flats smaller and smaller so that prices would seem more within reach of first-time home buyers -- care for a 152 square foot flat anyone?

There is public outrage about these microflats -- the smallest ones are smaller than a prison cell. How is that humane?

Chan says there won't be size restrictions on building flats

But Secretary for Development Paul Chan Mo-po says there is no need to impose restrictions on how small flats should be, because flexibility was needed for market adjustments, given the uncertainties during the period when the flats are under construction.

We all know real estate is a winning investment. How could one lose? There are no uncertainties in selling them because everyone needs a roof over their heads.

And then Chan twists the justification even further.

"There is a demand for such small units," he said. For example, he explained, young people who want to move out of their parents' houses could only afford these flats due to their limited budget. "It is not suitable for us to decide what size of the homes they are allowed to live in."

These flats are in demand because investors want to rent them out to people who want to move out of their parents' home. These buyers are even willing to pay the 15 percent stamp duty for buying a second, third, fourth... whatever number home.

Is it fair for people to have to live in such tiny spaces?

Would a first-time home owner really want to buy a 152-sq-ft flat, and pay over HK$3 million for it in a mortgage that will take over 20 years to pay off?

Hardly seems worth it for a matchbox-sized home in the sky.

Chan is mistaken for thinking the majority of buyers of these microflats are first-time buyers.

We should also keep in mind that Chan and his wife Frieda Hui owned a company that owned several flats that were illegally subdivided. Seems like Chan doesn't mind packing people in like sardines either.

Edward Yiu Chung-yim, associate professor at the Chinese University's department of geography and resource management, said the government should tackle the housing problem by improving the affordability of homes instead of imposing size regulation.

"If the high land price policy does not change, size restrictions would do more harm than good," Yiu said, adding such a policy would further discourage people from buying homes.

Has Chan even been in one of these microflats and tried to imagine how he would live in one of them?

It's amazing how someone who grew up in a housing estate doesn't even care to empathize with how people are struggling these days...

Fact of the Day: Microflats Getting Even Smaller

Can you live in a tiny space like this day after day, year after year?

Just when you thought Hong Kong flats couldn't get even smaller, they are.

Emperor International Holdings will have the tiniest flats in the city when it plans to launch a project where each unit measures 61.4 square feet or 5.7 square metres.

One can barely even fit a mattress in that space.

Located at 17-19 Yik Kam Street in Happy Valley, the project -- which is yet to be named -- converts an existing 21-storey commercial building into a residential one.

The unit's current measurement doesn't include the space allocated for a kitchen and bathroom.

But when they are added, the space is still smaller than a project in Jordan called AVA62. There each unit measures 152 square feet -- including a balcony -- selling for HK$20,000 per square foot or HK$3 million.

Microflats are very popular because average home prices have soared beyond the reach of average salary earners, prompting developers to scale down.

And to meet the demand, as many as 5,000 small flats are in in the pipeline every year until 2019, almost triple the average in the last decade.

We get that developers are appealing to investors and first-time buyers to create flats that are somewhat affordable.

But who wants to live in flats like that? What are the psychological effects of living in such tiny spaces?

It can't be good for one's wellbeing...