〈Asian Post, Dec 17, 2016〉Local buyers are finding it much easier to get a mortgage, and these small flats are far more affordable for those trying hard to get on the real estate ladder

Size certainly mattered this year, and predictions are that Hong Kong will be flooded by tiny flats in the forseeable future. Small flats were all the rage in 2016, with property developers tempting buyers with these micro homes.

Most developers concentrated on building small homes of 400 sq ft or less and they sold like hot cakes, as factors, such as restrictions on the size of mortgages approved by the banks and the impending interest-rate hike, restricted buyers' finances.

Denis Ma, head of research, Hong Kong, at international property consulting firm JLL, says another reason for the rising trend of mini flats in Hong Kong is that the average home prices have soared beyond the reach of most Hongkongers, prompting developers to scale down the size of homes.

"Right now, it's a game of how much a buyer can afford," Ma says.

King Yip, managing director of Hong Kong Mortgage, says one reason local developers are focusing on micro flats is that these homes are priced at less than HK$4 million on average, making it easier for buyers to get a mortgage - loans of up to 90 per cent in some cases - from banks.

According to a recent research report by JLL, as many as 5,000 of the small flats are expected to be built every year until 2019, almost triple the average in the past decade.

Property developer Emperor International Holdings exemplifies the popularity of small flats. According to its filing with the Buildings Department, the plan is to launch a project where each unit measures 61.4 sq ft.

The development - unnamed as yet - is located at 17-19 Yik Kam Street in Happy Valley. The new building will be built on the site where a 21-storey commercial building stands at the moment.

The measurements do not include the space allocated for a kitchen and bathroom in each unit, according to the department.

Thomas Lam, head of valuation and consultancy at Knight Frank, said in an earlier interview that this would make Emperor's flats the smallest in Hong Kong.

Adding kitchen and bathroom space, Emperor's apartment will still be smaller than Wisdom Gaining's AVA62 project in Jordan, the record holder for tiny flats.

Each AVA62 unit measures 152 sq ft - including a balcony - and is selling for HK$20,000 per square foot, or an average of HK$3 million.

Last September, Henderson Land opened sales of its One Prestige project in North Point. The developer put a price tag of HK$3.9 million, or HK$23,975 per square foot, on a 163 sq ft flat on the fifth floor. One Prestige flats will range from 163 sq ft to 170 sq ft, and cost HK$3.87 million to HK$4.78 million, an average of HK$25,248 per square foot. After factoring in a maximum 5 per cent discount, the average price would be HK$24,000 per square foot.

〈Asian Post, Dec 17, 2016〉Gains by Chinese mainland and Hong Kong stocks evaporated on Thursday, after the US Federal Reserve raised its short-term interest rate for the first time this year. Pedestrians pass a Hang Seng Index screen in Hong Kong.

Gains by Chinese mainland and Hong Kong stocks evaporated on Thursday, after the US Federal Reserve raised its short-term interest rate for the first time this year.

The benchmark Shanghai Composite slipped by 0.73 percent, or 22.85 points, to finish at 3,117.677 on Thursday, while the Hang Seng Index (HIS) in Hong Kong hit a four-month low by dropping 1.77 percent, or 397.22 points, to close at 22,059.40.

The Fed surprised markets by forecasting three interest rate hikes next year, instead of the two quarter-point increases previously projected, pointing to a faster-than-expected tightening path looming ahead.

The Hong Kong Monetary Authority immediately followed the Fed's lead by boosting the base rate by 25 basis points to 1 percentage point for the second time since 2006, a logical move to maintain its currency's three-decade-long peg to the US dollar.

The base rate, charged by the HKMA through its discount window, serves as the best indicator of interest rates in Hong Kong.

HKMA Chief Executive Norman Chan Tak-Lam said the monetary authority would continue to track US rate moves by increasing the city's borrowing cost in a progressive manner. Such a rising trend would not come with a delay and 'is expected to continue to be affected by the scale of outflows from Hong Kong dollar, international developments and other factors'.

Though the Fed interest rate hike is widely anticipated, it could cause a shrinking monetary base of Hong Kong dollars.

The monetary base in Hong Kong at the end of October was HK$1.61 trillion ($207.5 billion), a drop of HK$700 million or 0.04 percent from the end of September.

Rate-sensitive sectors like property and financial industries became the biggest losers in Thursday's trading. The HSI Properties Sub-index tumbled 2.6 percent, making it the worst performer among the four major sub-indices. HSI Finance Sub-Index slumped 1.84 percent, roughly flat with the broader market.

Earlier this month, the International Monetary Fund warned in its working paper that the higher property valuations in the Asia's financial center mean the local economy is vulnerable if interest rates climb faster than expected.

The IMF flagged the soaring borrowing costs, Chinese mainland-linked stress and a possible downturn in the real estate market as the three main risks looming over the city.

〈China Daily, Dec 16, 2016〉A big trend toward smaller things is well underway in Shanghai's luxury real estate market. A big trend toward smaller things is well underway in Shanghai's luxury real estate market. Stratospheric housing prices in the metropolis are forcing developers to downsize high-end properties to make them more affordable.

Shanghai's luxury real estate market today is replicating the story of Hong Kong,' says the Shanghai office of Hong Kong-listed China Overseas Land and Investment Ltd. 'Buyers are accepting the idea that luxury homes can have a floor space of 100 square meters, a frustrating reality that Hong Kong people have long lived with.' Sky-high home prices are pressing builders in Shanghai to redefine just how big a luxury property should be.

The average price of a 90-square-meter home is about 25 times average household income. More than two years ago, luxury homes with a floor area ranging from 250 to 400 square meters were commonplace for the company in Shanghai.

However, with housing fever showing no sign of cooling down over the past two years, the state-owned developer has been compelled to control selling prices by trimming sizes to 200-210 or 130-140 square meters. As of November, the average price of flats in

Shanghai had reached 50,000 yuan ($7,278; 6,885 euros; 5,785) per square meter, while houses priced at no more than 100,000 yuan per square meter can hardly be labeled as luxury. Upgraders who are in a hurry to replace their small apartments with better accommodation, have been the mainstay of purchasers.

The hard fact is that the seemingly endless escalation of Shanghai's home costs is lowering people's expectations for living space.

A batch of luxury flats in downtown Shanghai, 100 square meters in size and valued at 10 million yuan each, has proven to be highly sought-after. China Overseas says smaller luxury homes could well be a long-term trend, as Shanghai is poised to emerge as a mega city in the foreseeable future, dwarfing its peers like New York, London and Tokyo, both in terms of city size and housing prices. 'There is a big chance for overall home prices in Shanghai to surpass those of Hong Kong.

〈Macau Daily, Dec 16, 2016〉Here’s how billionaire Edwin Leong, one of Hong Kong’s largest retail landlords, got around Hong Kong’s new property curbs and saved almost USD17 million on his tax bill.

He managed to qualify as a first-time homebuyer, purchasing three luxury apartments on the Peak for HKD1.2 billion ($155 million) on the same day last month. Previously,?Leong had held no real estate in his name - despite owning more than 300 other properties, including apartments, hotels and shopping malls, through his company,?Tai Hung Fai Enterprises Co., and having an estimated net worth of $4 billion.

Wealthy buyers are finding legal ways around restrictions designed to cool home prices in the world’s least?affordable city, where leaders are grappling to shrink a yawning wealth gap. Hong Kong property prices have risen to near-record highs and sales volumes have surged since Chief Executive?Leung Chun-ying announced the latest round of curbs on Nov. 4, underscoring the challenges in taming the market.

“Since the policies of C.Y. Leung were introduced, most of the tycoons have been finding ways around them,” said?Alan Wong, director of the Hong Kong market at Landscope Christie’s International Real Estate.

About 70 percent of new apartments sold since last month’s measures in Hong Kong have involved first-time buyers who qualified for the lower rate, compared with about 30 percent before the new tax was imposed,?said Henry Mok, regional director of markets at Jones Lang LaSalle Inc. The government doesn’t publish figures on buyers who purchase multiple homes.

Leung, who announced last week that he would not seek a second term, has been trying to quell discontent over high housing costs, a factor that led to student protests in 2014. The government has tried to increase supply by releasing more land for sale, although prices have continued to climb because of the influx of mainland Chinese developers seeking a toehold in Hong Kong.?

Prices in the secondary housing market have risen 0.8 percent since early November to just 1.4 percent below a September 2015 record,?according to Centaline Property Agency Ltd. Adrian Cheng, executive vice chairman of New World Development Co., said the company was seeing a higher percentage of first-time buyers than before the new tax.

Apart from the first-time exemption, another method employed by the wealthy involves buying a shell company that owns a property, which?is treated as a share transfer and only incurs a stamp duty of 0.2 percent. If the company is registered offshore, the tax is zero.

That’s the tactic used in the Nov. 28 sale of a free-standing home?with a yard and swimming pool in the Kowloon district that was appraised at? HK$410 million, according to a filing with the Hong Kong stock exchange. If it had been sold as a home rather than through the British Virgin Islands-registered company that holds the property, the sale would have triggered 45 percent in taxes, including a flip tax because it was purchased earlier this year - a total of more than HK$180 million. Instead, the tax bill will be $0.

〈The Standard, Dec 14, 2016〉Standard Chartered (2888) has lowered the mortgage rate to a record low of Hong Kong inter-bank offered rate plus 1.33 percent.

The low rate is offered only to those who borrow more than HK$8 million. Amid intense competition in the local mortgage market, banks have lowered their nominal mortgage rate from HIBOR plus 1.4 percent in September to HIBOR plus 1.35 percent this month.

BOC Hong Kong (2388), in a bid to boost its mortgage loan volume cut its rate to HIBOR plus 1.34 offered for those borrowing more than HK$10 million. A cash rebate of 1.45 percent is also provided to customers.

Banks are lowering their mortgage rates at a time when the one month HIBOR has risen to 0.624 percent yesterday, which will ultimately raise the cost of borrowing for homeowners in the long term.

Meanwhile, Easy One Financial (0221), a developer turned lender, is tapping into the brokerage businesses in Hong Kong. The firm, backed by wet market king Tang Ching Ho who is the chairman of Wang On Group, said yesterday that the new securities operations has record more than HK$100 million in turnover this month. Ethan Choy Yau Fai, director at the Easy One Securities, said both online trading and broker assisted dealings are being developed. A brokerage outlet was also opened last month in Sheung Wan.

While competition is getting more intense among brokers in the SAR with mainland-backed firms offering low commissions to entice trade, Choy believes local brokerage operations will benefit from the mainland's financing demand.

The lending segment is also set to expand. "We make loans that banks won't be able to,'' said Billy Sit Sai- hung, general manager of risk management and compliance at Easy One Financial.

Banks are allowed to lend only up to 60 percent of the property's value as mortgage.

Sit said Easy One is able to provide a more humanized way to grant loans, especially to those who are unable to pass banks pressure tests or provide income proof. Sit added that small developers building village houses is also the firm's key target group as such projects have a potential to generate huge returns.