GO
Loading...

Shoeboxes support Hong Kong’s property sales

Even as property sales in Hong Kong, one of the world's most expensive housing markets, have stalled amid a slew of cooling measures, one segment is taking off: the microflat.

"On the selling day, we sold out close to 80 percent of our units for the first batch, so the small units are really popular," David Fong, managing director at property developer Hip Shing Hong, told CNBC. "We had close to 10,000 visitors to our projects over the last week."

Read More Hong Kong's housing market is 'least affordable': survey

Hong Kong's property market is the world's least affordable, according to a Demographia International Housing Affordability Survey, published in January. The survey found average home prices were 14.9 times gross annual median household income, the highest level ever recorded in the survey's 10-year history.

Philippe Lopez | AFP | Getty Images

"Young people keep waiting for new stocks and that is not coming by anytime soon," Fong said, noting the government's efforts to deliver affordable housing probably won't bear fruit for at least five years.

Read More Singapore and Hong Kong housing faces 'double whammy'

The developer is offering mainly 274-434 square foot apartments at the 98-unit Le Riviera, with some units running as large as 527 square feet. Twenty-two units were sold just over the weekend, according to data from BNP Paribas.

At 15,000-19,000 Hong Kong dollars per square foot, or around $1,935-$2,451, the smallest units at Le Riviera offer an entry price of as little as around $530,000.

"Millennials are now demanding less. They have a different lifestyle. They are marrying later. They are having fewer children," Fong said. "To maintain their kind of lifestyle, smaller units with that kind of affordability will work for them."

Read More Sky may not be falling on Hong Kong property

The strong response for Le Riviera's shoebox apartments follows another microflat development's recent well-received launch, the Mont Vert from Cheung Kong Holdings, which featured flats as small as 180 square feet.

The units may be small, but the demand for them appears likely to hold up.

"It's easier to buy once you have the down payment," Patrick Wong, an analyst at BNP Paribas, said in a phone interview. "When considering whether to buy or rent, you'd usually prefer to buy because the rent is very expensive."

Read More What London can learn from Hong Kong's property market

Wong also expects the shoebox units will attract investment demand, even if end-user demand flags.

"Rental [price] is still coming up, so this will also get some investor demand at this level," he said, noting that the returns will still be higher than the 2 percent mortgage rate.

—By CNBC.Com's Leslie Shaffer; Follow her on Twitter @LeslieShaffer1

Contact Real Estate

  • CNBC NEWSLETTERS

    Get the best of CNBC in your inbox

    To learn more about how we use your information,
    please read our Privacy Policy.
    › Learn More
  • Diana Olick serves as CNBC's real estate correspondent as well as the editor of the Realty Check section on CNBC.com.

Latest Special Reports

  • The clock is ticking its last 2014 tocks, and for stocks, that means it's time for a portfolio review and tuneup.

  • From the birth of a child to college, marriage, and retirement, a successful investment path leads to the good life.

  • With people living longer and saving less, they are finding that retirement and work are no longer mutually exclusive.