Hong Kong says no to nano flats as prices start to crater

A general view of Mount Nicholson project developed by Wheelock and Company in Hong Kong, China November 1, 2017. REUTERS

HONG KONG: Could nano flats -- billed as one way of solving Hong Kong’s chronic housing shortage -- be on the way out as quickly as they grabbed the public’s attention?

Two years ago, when the developer of a residential project in the New Territories unveiled units smaller than a parking space, an executive was quoted as saying: “Even the emperor living in a place as big as the Forbidden City still slept on a bed.”

Be that as it may, it seems ordinary residents are having second thoughts about super-tiny apartments. A sale over the weekend at the project, where some dwellings measure just 12 square meters (128 square feet), failed to attract much interest, with only two of the 73 units on offer selling.

“The rise and popularity of nano flats is largely centered around their relative affordability for buyers with limited budgets,” said Denis Ma, head of research at Jones Lang LaSalle Inc. “When housing prices start to sag, demand for these types of properties usually plummets as buyers turn their attention to larger units at the same price point.”

A slide in home prices is already underway in Hong Kong. Property prices have declined 6.3 percent from their August peak, Centaline data show, while Midland Realty said last month that new-home sales in November were on track to be the lowest by volume since early 2016.

History suggests small apartments tend to suffer more when there are price adjustments: The cost for units measuring less than 40 square meters dropped 12 percent during the 2015-2016 price correction versus a 9 percent dip for those measuring 70 to 100 square meters, government data show.

This will come as bad news to home builders hoping to cash in on the short-lived tiny craze, where apartments the size of a Tesla Model X were last year selling for around $500,000.

Jones Lang LaSalle predicts that 3,300 new nano flats measuring 19 square meters or less will be completed between 2018 and 2020, up by 35 percent from the previous three-year period. - Bloomberg