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Nano flats: Are they setting the standard?

Hong Kong Blog CVAS Nano Flats 1536x1040

The Government has made its move after listening to the market

The Government’s announcement of a minimum size for homes on land from the Land Sales Programme caught the market by surprise. The 280 sq. ft. was larger than some of the nano-flats developers had been selling and should be viewed as a positive if your objective is to raise the standard of living in the city. 

Just after the announcement, there was a rush on nano-flat sales. We have to pose the question: Is this demand for nano-flats sustainable, or will it weaken when it’s time to dispose of them?  

When making the announcement on 30 December 2021, Secretary for Development Michael Wong Wai-lun remarked that the Government had taken into consideration that starter homes for Hong Kong residents have a minimum saleable area of 250 sq. ft.

"Hong Kong should follow Singapore and Britain and set a minimum size for homes"

The decision was taken after a report by Liber Research Community, a civic group, was published in January 2021. The report said the rise of nano flats was due to Government policies and called for Hong Kong to follow Singapore and Britain and set a minimum size for homes. For the survey, Liber pegged its flat size at 260 sq. ft., roughly the size of two parking spaces.

Liber researcher Neon Yiu Ching-hei told the media that the Government’s policy on affordable housing had pushed developers to create smaller units, choosing quantity over quality. Nano flats, they argued, should not include utility platforms and balconies in their saleable areas, and many relied on windowless bathrooms, which needed mechanical ventilation and posed health risks. 

According to provisional figures from the Rating and Valuation Department, about 13% of completed private residential units have been smaller than 26 m² (280 sq. ft.) in the past five years. Since 2019, 76 primary residential projects offered nano flats, of which only 37% were tender awarded, with the remainder coming from redevelopment and farmland conversion projects leaving developers free to pursue their ever-smaller homes.

"Land tenders are not a significant supply source of nano flats"

Of the 24 projects with units under 200 sq. ft. mainly located in Hong Kong Island and Kowloon, only five are from the government tender sites, and the remainder are redevelopment projects. Clearly, land tenders are not a significant supply source of nano flats; therefore, the new rule will not significantly impact future supply.

The need still exists from people desperate to get onto the property ladder who start where they can afford to. Residential property below HK$8 million is eligible for up to 90% mortgage financing, which is the current price tag for primary residential units below 280 sq. ft. in Hong Kong Island, 320 sq. ft. in Kowloon or 400 sq. ft. in the New Territories.  

However, in December 2021, some developments saw a notable drop in interest in their smaller units. Usually, new flats released onto the market are more than 10 times oversubscribed. Attracting less interest was Henderson’s Caine Hill development in Sheung Wan, which offered 50 units under 285 sq. ft. and was only four times oversubscribed, and Chun Ho’s Soyo in Mong Kok, offering units under 228 sq. ft. was 2.7 times over.

Limiting units’ minimum size should enhance Hong Kong’s quality of living. However, in reality, it further burdens first-time homeowners who want to get a foot on a rung of the property ladder.  The down payment on new flats will be higher because they are bigger, unless developers drop their prices.


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