Moore’s Law states that computer processor speeds will double every two years, in a similar way Ricardo’s Law (of Rent) explains the continually diminishing size of Hong Kong apartments!
The relentless technological advancements that are driving the rise of Nano Computers are also having the same effect on apartment sizes in Hong Kong.
You see at $25,000 per m2 Hong Kong apartment space is not small change. It’s no wonder developers are doing their best to extract the maximum profit from their sites by shrinking apartment sizes and building sky high – the Cantillon Effect explains this. (To read about the Cantillon Effect click here).
These Micro Flats or as I like to call them, Nano-Apartments, are typically as small as 20m2 and cost $500,000!
They can be as small as 11m2 in size, but rent for A$660 per month on less than a 3% yield. Remember that 12m2 is an average parking spot!
The rise of the Nano-Apartment brings about a lot of questions about the state of the Hong Kong property market.
The Hong Kong House Price index has risen from approximately 35 in 2004 to an amazing +150. That is a rise of over 300%!
Its important to remember that this time its not different. That each cycle is the same, but different. Same drivers. Same economic process. But each cycle will manifest slightly differently due to such things as investor memory, the current legislation and technological changes.
Sadly, you don’t need to study history very deeply to realise that this limited access property is not a new phenomenon.
Understanding economic history and the underlying drivers of the economy make profitable investing decisions easier to make.
At Calnan Flack we strive to help investors understand and invest with the cycle hence making more profitable investment decisions.
Watch this Video from Aljazeera to learn more.