Why demand for nano flats is subsiding

Projects like SOYO in Mongkok only sold less than 30% of its 120 units.

Demand for nano flats is subsiding as seen in the low takeup in projects such as SOYO in Mongkok which only sold less than 30% of its 210 units during launch.

According to JLL, the weakening demand for nano flats can be attributed to the relaxation in the Mortgage Insurance Programme and interest rate hikes.

Nelson Wong, Executive Director of Research at JLL Hong Kong, said that the relaxation of buyers who are seeking houses from self-occupation are now finding it more feasible to purchase larger units given the latest relaxation in the Mortgage Insurance Programme. 

“Such demand upgrade, in turn, means that more small housing units become available, adding more competition to this market segment,” Wong added.

Interest rate hikes, meanwhile, have dampened investment sentiment, said Norry Lee, Senior Director of Projects Strategy and Consultancy Department at JLL.

“Figures from the Rating and Valuation Department show the rental values of Class-A units have dropped 13.1% between May 2022 and the previous peak in August 2019, when the new supply of nano flats increased,” Lee said.

“With the large volume of upcoming stock, investors are likely to be cautious about this market segment, as more rental pressure could build up and erode their investment attractiveness,” Lee added.

In 2022, 1,700 nano flats that measure no greater than 20 sq m (215 sq ft in saleable area) will be completed.