Among rich property owners in Hong Kong, one little-discussed question amid the city’s red-hot real-estate market is how to lease out property. That is a legitimate question when the Hong Kong stock market is at a two-year high despite many investment banks trimming down their expatriate workforce because of ever-increasing office rents.
Eton Properties has demonstrated a nice way to tackle the decreasing market for luxury tenants. The answer is neat, and almost every landlord in Hong Kong knows the trick – make your units smaller.
Knowing that the sum of the parts is always greater than the whole, Eton came out with a smart way to lease out 18 three- and four-bedroom apartments in its Woodland Villa estate that ranged in size from 944 to 1,661 square feet (88 to 154 square meters). The firm converted them into 270 “nano-flats” of 80-200 square feet under the new name of Mini Ocean Park Station.
That makes a lot of financial sense given that the 27-year-old housing estate now is asking monthly rents between HK$8,500 and HK$20,000 (US$1,087-$2,558), or about HK$100 per square foot. That is a yield improvement of some 60% over the original monthly rentals of between HK$70,000 and HK$120,000, or about HK$65 per square foot.
That may explain why some landlords want to convert to small units. There have been reports that some luxurious homes, traditionally the favorite choices of expatriates, have been vacant for a year because they could not find tenants who could afford the rents, not even among expats from mainland China.
At the other end of the market, living in small homes below 200 square feet in size is already a reality. More than 180,000 residents, if not more, are living in a subdivided units in old districts such as Sham Shui Po or Wan Chai after residential property prices hit record highs.
Some may give these tiny units the trendy name of “co-living space”. But in fact, they are called nano flats with only open studio formats.
As in the case of Woodland Villa, these units are equipped with an elevated bed above a workstation, and some have windows and independent bathrooms. Tenants can engage in short-term contracts as low as one year, which include utility charges, Wi-Fi and weekly cleaning service.
Demand for these small homes has heated up in recent years, and will probably remain so for the next few years as developers find it more profitable to market small apartments, as Eton has shown.
Still, Woodland Villa, listed as 53 Shouson Hill Road, is an interesting case because it is in the very exclusive Island South area, home to many of the richest tycoons in town.
But thanks to Eton Properties, some residents are paying an affordable price to live close to the rich people. Why not? It works for the tenants, and even better for the landlords.