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News Release

HONG KONG

At least 2,100 nano flats expected between 2017 and 2020

First-time buyers still expected to choose nano flats over Starter Homes Scheme


HONG KONG, October 25, 2017 – New supply of nano flats (saleable area of flat below 200 sq ft) will amount to an average of 510 units per year between 2017 and 2020, up from 151 units per year between 2014 and 2016, according to JLL's monthly Residential Sales Report released today.

JLL expects there will be 2,100 flats completed between 2017 and 2020, representing about 2.4% of total supply. The new supply of nano flat is only 1% of the total supply between 2014 and 2016. The majority of these nano flats will be located in the New Territories.

Nano flats are expected to target first-time buyers, the same audience as in the government's newly announced Starter Homes Scheme.

Henry Mok, Regional Director of Capital Markets at JLL, said: "Most first-time buyers can afford property costs within HKD 6 million. However, that budget would only enable them to buy a sizeable flat at old housing estates (those over 30-years-old) in urban areas given prices having reached record high levels. Given the preference of first-time buyers for newer housing options, they may still resort to purchasing nano flats with more affordable lump sum price tags. All in all, strong demand from buyers with a genuine need for housing is likely to push prices up further.

Ingrid Cheh, Associate Director of Research at JLL, said: "Our estimations on the maximum price tag using prevailing loan-to-value ratios and maximum debt-servicing ratios suggest that the pricing of Starter Homes could potentially overlap with that of private residential units."

"Nevertheless, the effectiveness of the Starter Homes Scheme would depend greatly on the alienation restrictions, issues around premium payments and subsidies to buyers at the time of purchase, which would not be released until mid-2018. Moreover, given that the supply of Starter Homes will take time to realise, buyers with a pressing need for housing may still opt for options in the private residential market. With pricing at record high levels, some buyers are still expected to turn to nano flats, owing to the lower lump sum payments involved," she added.

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