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."

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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.

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"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.

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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."

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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."

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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