TOKYO -- Apartments in Hong Kong are becoming so small that the city has had to coin a new term for them: "nano flats." Commonly defined as being smaller than 200 sq. feet, or about 18.6 sq. meters, these units are about the size of a parking spot -- and they are selling as fast as developers can build them.
South Walk Aura is a 29-story residential and commercial complex on southern Hong Kong Island being built by Henderson Land Development, a local developer headed by tycoon Lee Shau-kee. Most of its 142 units are nano flats. The 23 apartments put up for presale on April 10 reportedly sold out in 10 minutes.
A 183-sq.-foot unit on the 28th floor is currently priced at 5.496 million Hong Kong dollars ($700,136). That works out to a price of $41,183 per square meter, already 17% higher than what a unit on the same floor was going for in mid-March.
Robust demand for nano flats is a testament to Hong Kong's acute housing shortage.
"Most first-time buyers can afford property costs within HK$6 million," said Henry Mok, regional director of capital markets at Jones Lang LaSalle in Hong Kong. For that price they could buy a larger unit in an old housing estate, one more than 30 years old. Buyers wanting to live in a newer place, however, "still resort to purchasing nano flats."
According to an April 17 report by local think tank Our Hong Kong Foundation, the number of nano flats is to set to hit 1,066 in 2019, up nearly 17 times from 2014. "All in all, strong demand from buyers with a genuine need for housing is likely to push prices up further," JLL's Mok added.
But there is another type of apartment that makes even nano flats seem roomy by comparison. There are 92,740 subdivided units in Hong Kong, according to census data released in January. These tiny dwelling spaces are created by partitioning more conventional-sized apartments into two or more smaller units. According to the census, 209,700 people are living in subdivided units with a median floor space of 10 sq. meters. Median rent is HK$4,500.
The Society for Community Organization, a local nongovernmental organization, criticized the government last December, saying a lack of policy initiative is forcing residents to "pay high rent for subdivided flats, while no protection has been provided in terms of sanitation and safety." A joint survey released in March by units of the Hong Kong Jockey Club and the Hong Kong Sheng Kung Hui Welfare Council found that 80% of people living in subdivided units were suffering from mental distress.
The rise in nano flats and subdivided units is closely linked to income disparity. In 2016, the city's Gini coefficient worsened further to 0.539 (a figure above 0.5 indicates "considerable disparity").
"The fundamental reason Hong Kong has been able to nurture a handful of billionaires is due to its land policy," said Joseph P.H. Fan, a professor at the Chinese University of Hong Kong who specializes in family businesses. The former British colonial rulers kept tight control over land trading in Hong Kong, only leasing tracts to a few developers in order "to make governing more convenient," Fan said. That policy was basically inherited after the handover in 1997.
According to the latest list by Forbes, eight of Hong Kong's 10 richest people are property-related tycoons, led by Li Ka-shing, with a net worth of $34.9 billion, while the remaining two are also involved in property to varying degrees. This is in sharp contrast to such lists elsewhere. Tech entrepreneurs dominate in the U.S., while leaders of family-run conglomerates are on top in South Korea. Japan is more of a mixed bag, but even there only one developer is in the top 10.
"Hong Kong already has an interest group -- tycoons and homeowners," Fan said. While the government is laying out policies to rein in property prices, "it's just a drop in the bucket, and very difficult to make serious changes."
Nikkei staff writer Nikki Sun in Hong Kong contributed to this story.