Tiny Trend ….

Macau Business, 17 June 2021.  The soaring home price beyond the purchasing power of residents has given rise to studio flats or small-sized houses in the past decade. But will nano flats equivalent to the size of just a car parking space happen here?   For the full article, see here. 

Mike Lai and his wife finally moved into their love nest earlier this year, after getting married and the completion of the renovation of their MOP5 million flat at a new housing project in the district of Areia Preta. “We’ve spent about MOP300,000 in renovation, mainly adding two bedrooms to this studio unit,” says Mr. Lai in his thirties, a sales executive at a Cotai resort.

“We of course want to buy a bigger house, but we don’t have the budget,” he speaks of his home of about 500 square feet. “When my parents first visited the house before renovation they didn’t really like it, but after renovation they think it is much better. They think at least there are bedrooms.”

It’s not unusual for his parents to find studio flats strange — the proliferation of this type of homes, or flats in smaller sizes, has only gained traction here in the past decade, riding on the coattails of the soaring housing prices.

Official figures show studio flats only made up an insignificant portion of residential units completed each year before 2010. A total of 120 no-bedroom houses were constructed in the 2005-2009 period, representing only 1.2 per cent of new flats completed in five years’ time. A year later, about 142 studio houses were completed in 2010 alone, translating to about 3.6 per cent of total new flats that year.

The volume of new studio flats in the city has since then taken off. There were 281 studio flats built in 2011, accounting for 25.6 per cent of total houses completed that year, and the portion has hovered at a high level since then, reaching 57 per cent and 52 per cent respectively in 2013 and 2020, the government data said.

A total of 7,921 studio flats were constructed in the 2011-2020 period, translating to 30.7 per cent of 25,831 houses completed over the same period here. The second-most built type of homes was two-bedroom flats with 7,083 units in the 2011-2020 period, or 27.4 per cent of the total, followed by 5,503 three-bedroom homes (21.3 per cent), 3,840 one-bedroom units (14.9 per cent) and 1,484 houses of four bedrooms and more (5.7 per cent).

On the other hand, the home price has skyrocketed in the past decade in the wake of the robust gaming industry and tourism after the global financial crisis of 2008-09. The average transaction price of residential units was only MOP31,016 a square metre in 2010, which more than tripled to MOP105,064 a square metre in 2020, according to the Statistics and Census Service.

‘Tiny’ trend

The real estate industry says the prevalence of studio flats and smaller houses in recent years are due to higher costs and policy initiatives. Given the land cost, construction cost and the repayments to bank loans for project development, developers could only sell homes at a certain price level to break even, Gregory Ku Ka Ho, managing director of Jones Lang LaSalle Macau (JLL Macau), has recently said. “Developers also have to consider the purchasing power of buyers with the current rules and regulations, so building smaller flats has become a trend.”

One of the latest property curbs by the government he refers to was a new stamp duty of 5-10 per cent rolled out in February 2018 for buyers owning more than one property, as well as lowering mortgage loan ratios for first-time resident buyers aged between 21 and 44 years old for flats worth MOP8 million or below. In light of these measures, the current mortgage loan ratios for flats worth more than MOP8 million each range between 30 per cent and 50 per cent of the value of the property, while the ratios for flats worth MOP8 million or below each vary between 40 per cent and 90 per cent.

As the city has regulations about the minimum size of bedroom, kitchen and living room for some private residential units, the floor area of a two-bedroom flat cannot be smaller than about 500-600 square feet and worth at least MOP8 million, explains Mr Ku. “In view of the current rules, housing price level, purchasing power of buyers, most could only afford one bedroom or studio first-hand flats,” he adds.

Not nano yet

According to the Land, Public Works and Transport Bureau (DSSOPT), the size of a living room in a private flat of two bedrooms or more cannot be smaller than 12 square metres (129 square feet), while the bedroom and kitchen in general should be 9 square metres (97 square feet) or more and 4 square metres (43 square feet) or more respectively. For public homes for sale — also known as affordable housing — the government mandates the minimum size should range between 25.5 square metres (274 square feet) and 42.5 square metres (457.5 square feet) for one-bedroom to three-bedroom houses.

These regulations help prevent the occurrence of nano flats in the city as of now — usually smaller than 200 square feet and just slightly larger or equivalent to the size of a car parking space — which are commonplace in nearby Hong Kong. The smallest first-hand homes on sale in the territory in recent years came from YOHO: Cotai Marina Bay, a 388-unit residential complex opposite the integrated gaming resort Galaxy Macau in Cotai, with flats as tiny as 322 square feet. Another new residential development also built by YOHO Group — which is behind residential development YOHO Twins on Small Taipa Hill and The Macau Roosevelt, a hotel situated in the Macau Jockey Club — at the same location, Cotai Star Prestige, also boasts studio flats as small as 361 square feet.

The Macau General Association of Real Estate warns in its latest annual briefing: “Developers will continue to build smaller flats in the future, which could be quickly and easily absorbed by the market with a lower price tag [compared with larger flats].”

Nothing is impossible

Legislator Sulu Sou Ka Hou pays close attention to this issue, which might affect social stability. In his latest enquiry to the government this year, he noted: “Given the limited land resources and the relatively low purchasing power of the local youth, developers have kept building the so-called studio flats in recent years for the maximisation of their profits.” Among the 35,544 flats undergoing design stage for construction as of end-2020, he points out 19,844 were studio units, or 55.8 per cent of the total.

“The developers justified studio flats as being sought after by young couples, newlyweds and single persons, but this is not true. The proliferation of studio flats are due to soaring home prices and rents, in addition to little efforts by the government in enhancing the public housing supply over the years,” Mr Sou says. “In order to have a home and settle down, some residents… have no choice but purchase these small [first-hand] flats with subpar standards.”

“As the portion of studio flats among new units completed has expanded quickly, it is worrying that the flats here will become smaller and smaller, further reducing the living quality and privacy [of residents]. This will be harmful to the long-term development of [local] families and community,” the lawmaker adds. “If we do not tackle this trend properly, it’s not really impossible for Macau to have nano flats like those in Hong Kong.”

‘Commercial decisions’

In a reply to the enquiry of Mr. Sou, Chan Pou Ha, director of DSSOPT, noted in a written reply: ‘In light of the housing needs of residents, the SAR Government will tackle this through the five-tiered housing ladder, namely, social housing [public homes for rents], affordable housing, sandwich class housing that is undergoing discussion now, elderly housing and private homes.’

‘Addressing the market demand, private developers could adjust the number and size of flats they are going to launch in the market in accordance with regulations and rules. These all are commercial decisions,’ the reply only stated.

Living at their new home for a few months, Mike Lai and his partner have been enjoying the new chapter of their life. “The size [of our home] has so far been enough for the two of us,” he says. “Of course the bigger the house the happier we will be.”

“If we’re having children and when they have grown up we will definitely need to look for a bigger house,” he continues. “This will only happen if we have enough money by then.”

Article by Tony Lai, Macau Business magazine.