High prices for small flats may put off homebuyers

HONG KONG: Homebuyers looking for small flats in urban areas as a first choice may be deterred by soaring prices — such as the HK$6 million (RM2.39 million) being asked for a new 400 sq ft apartment now on offer in Wan Chai.

Queen's Cube, a joint development between Nan Fung Group and the Urban Renewal Authority (URA), was set on Wednesday, Oct 6 to offer 72 flats in the block, ranging in size from 401 sq ft to 582 sq ft, for sale. The block comprises 96 flats.

The cheapest flat on offer in Wednesday's release is a 401 sq ft apartment on the fifth floor priced at HK$5.97 million, or HK$14,888 per sq ft, based on gross floor area. Excluding the common areas, the price works out at HK$21,709 per sq ft.

The most expensive flat in the building is a 578 sq ft one-bedroom one that will be offered at HK$10.1 million, or HK$17,478 per sq ft, based on gross floor area.

The developer released recommended prices for the 72 flats in three batches, with an interval of two days between each announcement. In its first announcement it said 30 of the 72 flats would be sold at prices that averaged HK$16,431 per sq ft. That was respectively 26% and 56% above transaction prices of HK$10,500 per sq ft and HK$13,000 per sq ft for flats in buildings in the area that are one to three years old.

"These pricey tiny flats are for investors. Not for genuine end-users," said Sandy Yue, sales manager at Chung Kong Property Agency, which focuses on sales in Wan Chai and Causeway Bay.

A family on an average household income would find it difficult to afford for such a flat, she said.

Flats in older buildings in the area of a similar size would sell at prices ranging from HK$2 million to HK$4 million, she said. "It will be depend on the age of the buildings and the views commanded by the apartments." A 500 sq ft flat at the 34-year-old Jet Foil Mansion at 415-421 Jaffe Road in Wan Chai was recently offered at price of HK$3.28 million, or HK$6,560 per sq ft, said Yue.

At this price it could generate a rental yield of 4.5% a year since it could be let for HK$12,500 a month.

"Some investors will go for smaller flats which involve a smaller lump sum amount," she said. Along Jaffe Road, some older flats sized about 300 sq ft were being offered for HK$1.9 million to HK$2 .3 million each, Yue said.

A strong response to the Queen's Cube release would help boost transaction volumes and prices in the secondary market in the area she said. Already asking prices in buildings in the areas such as The Zenith, J Residence and York Place, have been raised by 10% after Nan Fung offered the Queen's Cube flats at higher than expected prices last month.

According to Midland Realty, an 879 sq ft flat at The Zenith, opposite Queen's Cube, sold for HK$9 million, or HK$10,239 per sq ft, last week. The Zenith, jointly developed by Chinese Estates Holdings and the URA, was completed in early 2007.

Another purchaser paid HK$7.6 million, or HK$11,692 per sq ft, for a 650 sq ft flat at J Residence, on Johnston Road. J Residence was ready for occupation in August 2007.

Asking prices at another residential project, York Place, which was completed in March 2009, were HK$8,000 to HK$14,000 per sq ft. — South China Morning Post