Developers to shift focus away from building nano flats
New supply of nano flats will start to decrease since 2022
HONG KONG, 30 October 2019 – According to JLL’s latest Residential Sales Market Monitor released today, the measures included in Chief Executive’s Policy Address on 16 October, that aim to address Hong Kong’s chronic housing affordability problem, are likely to boost demand for properties within the secondary market. Developer will shift focus away from building nano flats. However, JLL maintains its forecast for house prices to fall across Hong Kong, as the economy weakens which will impact on overall buying sentiment.
One of the main measures within the policy address was to help first-time homebuyers, with the Government relaxing the cap for loan-to-value (LTV) ratios of up to 90%; the maximum property value is now fixed at HKD 8 million, up from HKD 4 million. In addition, for both first-time homebuyers and upgraders, the cap has been moved from HKD 6 million to HKD 10 million for a maximum cover of 80% LTV. Relaxing the LTV ratio is expected to aid in opening up the secondary market for first-time homebuyers by substantially lowering the required down payment.
Henry Mok, Senior Director of Capital Markets at JLL, said: “With the Government relaxing the cap on LTV’s, this opens up more choice for first-time buyers and increases their purchasing power. As such, we believe developers will likely shift away from incorporating nano flats in their new developments. We will start to see the new supply of nano flats decrease from 2022.”
Cathie Chung, Senior Director of Research at JLL in Hong Kong, said: “First-time home buyers previously had very limited options to enter the housing market, making nano flats relatively attractive. However, the lower down payment now allows these same buyers to target larger sized stock in both the primary and secondary market. With the ability to target the secondary market, we believe that the typical premium paid for new stock will be reduced, meaning that developers will have to price their new projects competitively.”
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