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News Special


Demand for Small Flats Shows No Sign of Shrinking

Boutique Central development, 28 Aberdeen St, embodies small unit trend


With each floor housing just two units reminiscent of hotel rooms or serviced apartments, 28 Aberdeen Street reflects developers' confidence that demand for small units in Hong Kong will be strong as it is in other major cities worldwide. 

While the secondary market for larger flats has slowed down, demand for apartments that are small yet comfortable enough for a home, especially in the primary market, is solid and is expected to surge further. 

Rentals for small units in Hong Kong will outperform larger units by a mile, according to our Managing Director and Head of Capital Markets, Joseph Tsang​​. Rental demand for modestly-sized units is rising as the secondary sales market eases, triggered by both the Government's decision to hike stamp duty to 16% and fears of an imminent series of 25 to 50 basis point interest rate increases.

"Mini units can command rental returns of 20% above normal market rates."

- Joseph Tsang, Managing Director and Head of Capital Markets, Hong Kong

"Any development on Hong Kong Island attracts a great deal of attention. 7,441 units will enter the market between now and 2020, but only 283 units will be in Central and Sheung Wan, accounting for just 0.3% of the overall unit supply," says Tsang. 

Demand for small apartments "always boils down to the location and building design," he adds. "There is virtually no development comparable to 28 Aberdeen Street​ (located near the Grade 3 Historic PMQ) on Hong Kong island, particularly, in Central."

This makes them a prime target for investors looking to buy to let. “Mini units can command rental returns of 20% above normal market rates. For example, in Central a 1,000 sq ft unit rents at about HKD50 psf, but a brand-new unit of 400 sq ft can command HKD80 psf," says Tsang, "because more people can afford that size of flat."​

Prices for units at 28 Aberdeen Street range from HKD11.767 million to HKD16.555 million, after discounts, or HKD28,912 per saleable sq ft to HKD40,676 psf. The landmark project is expected to be completed in the latter half of this year.

Tsang believes 28 Aberdeen Street will generate roughly 3% annual return per annum, "assuming a HKD30,000 psf purchase price." 

28 Aberdeen Street is designed and built by privately-held local developer The Development Studio, founded by Keith Kerr, formerly CEO of Swire.

"We expect the trend to build smaller units will continue for at least two more years," Tsang concludes. 

For more information on residential sales and acquisitions, please visit our dedicated webpage, or contact Henry Mok.