A Change in Trend for Hong Kong Tiny Homes
- Reference: Financial Times: “Hong Kong property: developers mourn demise of ‘coffin homes’ boom”
- Reference: Bloomberg: “Hong Kong’s Tiniest Apartments Take Biggest Hit in Housing Slump”
Hong Kong has long had a problem with housing affordability and overcrowding, leading to the proliferation of small living spaces known as “nano apartments” or, more ominously, “coffin homes.” These small dwellings have traditionally been popular among cash-strapped residents looking for a more affordable place to live. However, for the first time since 2014, buyers are now shunning these types of living spaces.
One reason for this shift is the decline in Hong Kong’s fortunes as the gateway to China, which has been hit hard by the coronavirus pandemic. As a result, developers have struggled to sell even half of the studio apartments they have built this year. In addition, vendors of nano flats have seen declines of more than 20% on sales this month.
This trend is reflected in the overall housing market, with home prices in the city dropping by more than 14% and sales volume at a decade low. Analysts, including Goldman Sachs, predict that Hong Kong home prices could drop by another 30% by the end of next year.
The city’s largest developer, Sun Hung Kai Properties, has seen its debt to equity ratio worsen and did not even bid in an auction for former airport land, which was won by CK Asset for 40% less than the previous valuation. Shares of CK Asset and Henderson Land have also fallen about 10% in the past six months, with Henderson Land trading at a forward price-to-earnings ratio more than 40% lower than even 2014 levels, during the last property market decline.
According to the latest data from the Hong Kong Census and Statistics Department, the demand for rentals of private residential properties in Hong Kong has remained relatively stable, even as sale prices have declined. This trend may be influenced by the increasing number of young professionals moving from mainland China to Hong Kong, which could contribute to the stability of property prices in the city and make rental yields more attractive.