Inflated Floor Areas Part 1:
Feel Taken? Just Deflate Them!
Real Estate Analysis Limited
humble author is supportive of using a floor area measurement method based
on the concept of exclusivity
i.e. floor space which is exclusively-only meant to be possessed, owned,
enjoyed, and utilized by the owner of a property unit, be it residential,
office, retail, or industrial.
high rise residential unit as an illustration,
the living room, dining room, kitchen, utility room, washroom(s), bedroom(s),
and the like are exclusive to the unit owner, while the common lobbies,
elevator shafts, staircases, machinery and plant rooms, parking areas, and
the like are not, but are shared by all the relevant owners-occupants in the
which are similar to the strata-titled units we have here in Hong Kong, are
sold on a NET floor area basis which only includes the
exclusive (internal) floor area of a unit plus the full thickness of its
external walls and half the thickness of its shared-party walls.
in Hong Kong, strata-titled units
on a GROSS floor area (GFA) basis which includes not just the
exclusive floor areas but also their shares of the °•common areas°¶. Moreover,
there is no uniform method in delineating this gross floor area i.e. it is
generally up to the developer°¶s fancy as to which and how much common areas
are to be included.
is done despite there is actually a uniform SALEABLE floor area
publicized by the Hong Kong Institute of Surveyors and adopted by government
departments and practitioners in recent times. Presale projects are also
obliged now to provide the saleable areas too. It resembles the NET floor
area used in North America.
also have a utilization percentage
obtained by dividing the exclusive floor area of a unit by its gross floor
area. As such, different buildings-complexes would have different
utilization percentages because the proportions between the unit-exclusive
areas and common areas vary from building to building. Typically, these
percentages range from 60% to 90%. However, some may go below 60%.
Naturally, assuming all other factors being equal, a real estate buyer would
pay more for a unit in a building which has a higher utilization percentage.
some purchasers of new properties feel °•taken°¶
by the developers when they realize the units they have bought appear way
smaller than what the gross floor areas suggest, especially with buildings
which harbor a significant amount of common areas. An advertised 1000 ft2
residential unit may well turn out to contain only 650 ft2, sometimes even
significant amounts of common areas have also come about in recent years
owing to government exemption of certain (types of) floor areas, which
otherwise would be restricted by building regulations, to encourage greener,
healthier, and generally better built environments.
the average residential price per square foot hovering around HK$5,000 / ft2
on a gross floor area basis (or US$640 / ft2), it is no wonder that there
have been cries, rightly or wrongly, of foul play.
Is there a
Yes, and technically it is easy = just stipulate that from now on (or some
start date), properties are to be sold on an exclusivity of floor area basis
and in Hong Kong, that would probably mean adopting the SALEABLE floor area
basis, as it already exists. And analysts like your humble author would
welcome this, for at least we do not need to bother with the utilization
Yes, for one, prices per square foot would become and sound much higher. For
instance, say a 75% utilization ratio building, a HK$8,000 / ft2 based on
gross floor area would become HK$10,667 / ft2 based on saleable floor area
overnight, although the total unit price would remain the same.
also take the pubic at large some time to get used to it
but at the same time, purchasers will have NO more reason to fear or feel
taken by inflated floor sizes.
Inflated prices still?
Yes, but that°¶s another story for another time.
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