Surge in demand for one bedroom apartments in Hong Kong

Since we opened a Hong Kong office back in 1995, we have always had a keen interest in how the property market is performing there.  And we have witnessed a recent surge in demand for one bedroom apartments. It seems that last year’s trend for studio apartments has passed as buyers and investors now recognise the value of having more living space. Several developments are experiencing record demand and high sale prices for units in excess of 400sq ft.

A new residential development in Sai Yung Pun, for example, has one bedroom apartments of 407sq ft selling for US$2.13m. Ten years earlier, the apartments would have only been 200-300sq ft, whereas now developers are offering more generous proportions of between 400sq ft and 700sq ft (even a luxurious 1,400sq ft at the very top end of the scale). Investors too are snapping up the units as they become available because of their ease for rental purposes in comparison to studio apartments for single residents and young couples.

As someone who keeps a close eye on property trends, I’m concerned that interest in the Hong Kong market is being kept artificially high and that property investors are facing some unpleasant factors as a result. Firstly, developers are rushing to finish to meet the perceived demand. There are 7,900 units in 20 new apartment blocks due to market before August this year alone and the media coverage is causing concern among buyers that they are missing opportunities – in March this year, more than 23,000 people registered an interest in just 1,000 units in one development. Secondly, this is driving up local prices that were already at extreme levels.

Thirdly, the Chinese government is under pressure to control property prices and make them more affordable (especially in major cities) for residents. As a result investors are facing a rise in stamp duty to 15% for second homes, the second rise in just three years, and rising mortgage rates. For some, the unnecessarily expensive Hong Kong market isn’t an issue (a local agent for the Monterey development in Kowloon district noted that a single buyer had purchased six units at HK$74m while the nearby Cullinan West complex is selling units at HK$26,382 per sq foot) but I would strongly recommend investors not to enter such a frenzied and uncertain market and instead, look for sound property investments elsewhere such as London.

The trend for one bedroom apartments I witnessed in my visit to the Hong Kong office this month is something that strikes a chord with what we are witnessing in the London property market too. Many Chinese investors are buying one or two bedroom apartments in prime central locations for their children while they are studying in London. As a consequence we are seeing a high demand from overseas investors for property of this nature.

Once they have finished their studies, they can choose to continue to live and work in London staying in the property or they can return home and their parents can keep the property for rental purposes and enjoy good rental yields from either more students or young professionals. However, the option to sell is also very attractive as, in a similar way to the trend in Hong Kong, one and two bedroom properties are in demand in London. There are plenty of options here for overseas investors and, unlike Hong Kong, the prices aren’t being forced to unnaturally high levels by media headlines.

It is to fulfil this interest in London property that we have held an office in Hong Kong for more than 20 years and have recently expanded to open a new office in Shanghai. Both offices offer an end-to-end service with expert advice on the UK property market and support to navigate the UK legal and tax obligations on a one-to-one basis in the client’s preferred timezone and language. We are able to offer the best one bedroom apartments and the best deals in London as they become available to Chinese investors. London is a market that is well worth considering as Hong Kong soaring prices make it less and less appealing