Cubicle-sized homes: the future of Hong Kong?

February 4, 2015 / By

Last year, a number of developers released onto the primary sales market some of the smallest private flats Hong Kong has ever seen—as minuscule as 165 sq ft, saleable area—prompting me to raise my eyebrows on the livability of future homes in the city if this trend is to continue.

In fairness, there have been a number of catalysts urging developers to build such cubicle-sized homes in the city. With housing prices—those of Class A units (of size smaller than 431 sq ft, saleable area)—having gone through the roof, developers have seen the opportunity of creating ever-so-small apartment units to keep lump-sums affordable. These aforementioned 165-sq-ft homes, for instance, would still fall into the less-than-HKD 2 million lump-sum category but the availability of apartments in this price range has almost dried up. Along with the government’s recent efforts in putting up more land designated for small flats to meet its supply target, there is a risk that developers may build yet smaller flats in the future to still be able to capture demand from first-time homebuyers clutching at straws.


Source: HKSAR Government, JLL Research

Luckily, there are still a few gatekeepers preventing flats from going tinier than those being offered in the market.

Generally speaking, a developer’s motivation is a function of both the overall development potential and capital expenditure. While, on the one hand, a higher unit price can be masked in the more attractive lump-sum payments of smaller units, the necessity of allocating additional common area to a design primarily comprising of cubicle-sized homes would sacrifice the overall efficiency and saleable area of a development, thereby reducing revenue potential. Moreover, with construction costs varying in accordance with the quantity of material being deployed, building a greater percentage of small units—given additional requirements for fittings, finishes and appliances—could potentially lead to higher development bills. Hence, unless a developer needed more of such units to fill in the blanks of a development envelope, its best-off strategy would not be to stack up the smallest units possible but instead, to draw an optimum balance between flat size/mix, development efficiency, costs and profitability.

What’s more, the government has recently expressed its intention to tackle the issue of “cramped living conditions among the local population”, alongside its housing supply objectives. The internal floor area (IFA)[1] of those units being offered in the market is already closing in on 140 sq ft, IFA—the average living space per inhabitant in the city’s public rental units. Going any smaller than that would raise concerns from a social perspective. In fact, some lawmakers have already been seeking to formulate a standard for living space per person in the public rental housing space. Although targeted at the public—and not private—housing market, developers should expect increased scrutiny on this topic going forward and should be better off to safeguard their reputation.

That gives me just a little bit more comfort.


[1] According to the Code of Measuring Practice issued by the Hong Kong Institute of Surveyors, IFA is the area contained within the enclosing walls of a unit measured to the interior face of the external wall or separating wall. Saleable area is the area contained within the enclosing walls of the unit measured up to the exterior face of an external wall or the centre line of a separating wall between adjoining units. Generally, saleable area is larger than IFA of a unit.


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