Trendy spacious lofts in Hong Kong creating an underground marketMonday, February 15, 2010
Rising rents and surging prices of apartments in Hong Kong are driving a trend towards converting older industrial and commercial buildings into lofts for residential living. Lofts are the latest big thing and are often created without formal approval in old or disused industrial and office buildings, according to real estate agents. But they appeal because they tend to have high ceilings and prices well below market rates.
While a standard $500 square foot apartment in Hong Kong might set you back HK$4 million you could get double that in the unofficial loft market, it is claimed.
One agent said he recently helped an expat buy an 800 square foot commercial turned residential unit for HK$32 million which the buyer intends to uses as his office and home.
‘Rents of homes in Sheung Wan range from HK$20 per square foot to as much as HK$40 per square foot, but tenants in such loft apartments are paying less than HK$15 per square foot,’ he said.
But although these kinds of properties might be seen as bargains by buyers and tenants they end up with a distinctly unfashionable address in a rather run down neighbourhoods and run the risk of breaching government regulations. Long term use, for example, does not necessarily lead to lawful use.
A spokeswoman for the Buildings Department said whether or not such conversions were legal would depend on whether the building was zoned for residential use or whether structural changes had been carried out in which case Buildings Department approval was required.
‘For example, if an owner renovates a bathroom that requires structural change but does so without our approval we will require the owner to restore it because they are illegal structures,’ she explained.
Charles Chan Chiu-kwok, the managing director of Savills Valuation and Professional Services said that the occupation permit issued when a building is completed mentions its usage. If an owner does not follow this designation, the usage will not be lawful.
But the changes to the building only usually come to light if the owner decides to sell. So a converted building could be rented for years for residential use without the authorities knowing about the situation.
But the situation does not seem to bother those seeking to rent larger properties at a time when rents are rising. According to Simon Lo Wing-fai, director of Colliers International Hong Kong research and advisory department, rents have continued to rise in the last two months and he predicts a double digit rise in residential rental this year.
By comparison rentals for commercial or industrial properties turned apartments were much lower, he added.
The Consumer Council said there has been a proliferation of promotional materials for apartments situated in former factory buildings and warned that converting industrial or commercial buildings for residential use requires the approval of the Town Planning Board and buyers could not live in converted units if a developer had not been granted a change of use.
But others point out that from the outside it is difficult to prove that units in these industrial or commercial buildings are used for residential use.Source: [Property Wire News]