Of the 1,549 micro-apartments built by 10 developers in Hong Kong since 2016, one in three remained unsold as of this week
The smallest abodes are likely to lead the plunge in property prices in 2019, with declines of up to 30 per cent, according to industry analysts and developers
Hong Kong’s infatuation with micro-apartments, some of which hold the world record as the smallest living space constructed for humans, has ended almost as quickly as it began.
Known variously as nano flats, micro-apartments and shoebox homes, these abodes are specifically designed to be small, typically less than 200 square feet (18.6 square metres) in size.
Two of every three of these homes built in Hong Kong since 2016 were constructed this year. Of these 976 units that were added, 461 units remain unsold as of this week, according to calculations by the South China Morning Post using data by Dataelements, which monitors the sale of new flats in the city.
The unsold homes, backed by some of Hong Kong’s biggest developers, are what remains of a bull market that until August was the world’s most expensive urban centre to live in.
The infatuation began in late 2014. A supply shortage, combined with mortgage rates that hadn’t budged for a decade, had caused home prices to spiral.
Until nine months ago, it was not uncommon for a dozen buyers to submit bids for every new home on sale. That gave developers the reason to raise prices, sometimes by up to 14 per cent within weeks between different phases of a launch.
As spiralling prices put more homes beyond the reach of first-time buyers, the smallest units – and the only ones within budget – became popular.
Sensing a trend and seizing the opportunity, savvy developers piled in and subdivided what’s already small into the minuscule, setting one record after another for diminution.
CK Asset Holdings, the flagship company of retired tycoon Li Ka-shing, set the trend in motion in 2014 when its Mont Vert project in Fanling sold out in a massive success. The smallest unit, at 165 sq ft, was available for HK$1.29 million after a 15 per cent discount.
A record 976 of these were offered for sale this year in Hong Kong, more than double the 452 last year, and an 18-fold increase from 2013, according to data by Dataelements.
The high-water mark for this segment of the market was set in May, when a 190-sq ft flat at New World Development’s 30-storey Artisan House in Sai Ying Pun sold for HK$6.52 million, or a record HK$34,315 per sq ft.
The bull market began to lose stride in August, after Hong Kong’s Chief Executive Carrie Lam Cheng Yuet-ngor introduced a vacancy tax to force developers to add to the city’s housing supply, while banks began raising mortgage rates for the first time in 12 years.
Faced with a surplus of available homes, developers began offering discounts across all property types, by up to double-digit percentages, to attract buyers, causing prices to spiral downwards.
That changed the consideration for buyers, as larger flats that previously seemed out of reach are now affordable. In such a market, the smallest abodes became the first casualties.