As prospective buyers in Hong Kong, Andy Knight and Michelle Tennant were faced with a familiar trade-off: shell out massive amounts of money for a few additional square feet, or make the most of a 300-square-foot apartment.
The couple chose the latter, equipping their new abode with a hideaway TV, a swiveling wall, and a bathtub that converts into bedroom and living-room space.
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"The design appeals to a niche market," Tennant told CNN, adding, "But I'm surprised it hasn't caught on more."
According to data published last month by the South China Morning Post, microapartments have recently fallen out of favor in Hong Kong. The paper's analysis found that a third of the city's microapartments — those with less than 200 square feet of space — built since 2016 remained unsold at the end of last year.
In Hong Kong and other cities, the death of microapartments could topple a phenomenon that's popular among developers and younger buyers.
But there's a simple explanation for the decline.
In 2014, average home prices in Hong Kong reached record highs — about $1,900 per square foot. Around that time, developers began recognizing the demand for tiny, cheap apartments that would allow people to continue living in the city. Over the next four years, more and more city dwellers were willing to sacrifice space in exchange for lower home prices.
Things changed in 2018, when Hong Kong proposed taxing unsold new homes. As developers scrambled to get rid of their empty properties, they began selling them at discounted rates. Suddenly, more people in Hong Kong could afford a bigger place.
"There is a huge risk in building micro flats, because once the market shows sign of turning, this type of property will be the first to be abandoned by the market," Alvin Cheung, an associate director at Prudential Brokerage, told the South China Morning Post.
While Hong Kong is still considered the most expensive city in the world for expats and one of the five most expensive cities in terms of cost of living, the need for tiny homes isn't as strong as it once was.
Real-estate experts have estimated that buyers in Hong Kong now prefer a home of about 600 to 700 square feet. They also say microapartment prices could fall by 30% in 2019 — a much steeper decline than the 10% to 20% expected for the city's overall market.
This decreased demand could presage a trend in notoriously pricey cities like New York and San Francisco, where microapartments tend to be slightly more spacious.
When it comes to housing affordability — the cost of living relative to how much people earn — Hong Kong is even less affordable than the most expensive US markets. If microapartments can't survive there, it could mean bad news for those who have invested in tiny units in other areas of the world.
