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Investors - FEBRUARY 5, 2019

Why home sizes are shrinking in Asia

by Jennifer Molloy

Small floor plates are nothing new in Asia’s densely populated cities, but the rise of the single-person household is a global phenomenon. Delayed marriages, rising divorce rates, aging populations and growing numbers of retirees living alone are all influencing this global shift. In fact, single-person households account for close to 30 percent to 35 percent of all households in Europe, the United States and Japan. The equivalent figures in Hong Kong, Singapore and China are still low by comparison, with the number of single-person households likely to increase as these countries further develop, according to Adeline Chan, analyst, research and strategy – Asia Pacific (real estate and private markets), with UBS Asset Management.

Adding to these structural changes, increasing home prices and stagnating wages have led to worsening home affordability, notes Chan, who indicates developers have responded to the situation by building smaller units in an effort to keep overall home prices within an affordable range.

And in Asia and globally, the rising number of single-person households has led to a reduction in required living space. “Across Asia, home sizes are shrinking, and apartment living is becoming a standard,” observes Cuong Nguyen, head of Asia Pacific investment research, PGIM Real Estate. Along with demographic shifts and lack of affordability, the reduction in needed living space is indicative of “a clear shift from owning to renting,” he adds.

A good example of this comes with the micro-apartment buying craze in Hong Kong in early 2018, although the fad had started to fizzle by year end, according to the South China Morning Post. Such “shoebox flats” are about the size of a standard Hong Kong parking space (134 square feet or 12.5 square meters) and range in price from HK$3 million ($382,334) to HK$7.86 million ($1 million), making them the only affordable size for many first-time buyers.

But recent attempts to sell these tiny homes fell flat, so to speak, when only two of 73 sales closed for even smaller units (128 square feet or 11.9 square meters) costing HK$2.85 million ($382,334) at Hong Kong’s T-Plus project in Tuen Mun, reported the South China Morning Post in December 2018.

Although some may need little space for living, increasingly prohibitive costs — resulting from rising interest rates on mortgages and a proposed vacancy tax on developers — are starting to quell speculative demand.

Of course, compact-household sizes vary by location and region. In Tokyo, for example, units less than 45 square meters (484.4 square feet) account for roughly 75 percent of all rental listings in the area, with the core of the city’s rental market composed of studio and one-bedroom units of between 15 square meters (161.5 square feet) and 30 square meters (323.0 square feet), or what would be considered a micro-apartment in New York City. Different lifestyle norms, however, likely play a role in the perception of adequate living space, as residents of Japan’s urban areas typically prefer to dine and socialize outside of the home and rarely invite friends home, says Tetsuya Kaneko, director, head of research and consultancy, with Savills Japan Co.

In addition, “rents for compact units in central Tokyo are affordable compared to those of Hong Kong; as such, the financial incentive for co-living is more relaxed,” suggests Kaneko.

 

This is an excerpt from Housing people, a feature story appearing in the March 2019 issue of Institutional Real Estate Asia Pacific.

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