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Rent determinants of sub-divided units in Hong Kong

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Abstract

This paper examines the rent determinants of sub-divided units (SDUs) in Hong Kong by hedonic pricing models. The supply of low-cost housing by SDUs is achieved at the expense of tenants’ living quality and tenure security. Tenants have to make trade-offs of living space and housing facilities for lower rent, resulting in overcrowdedness and poor living environment. Some SDUs even lack basic facilities for sanitation and ventilation. As most previous property price studies presumed the presence of these basic facilities, SDUs provide a rare opportunity to examine the effects of their deficiencies on rent. Meanwhile, due to the illegality of the building works, most rental agreements are arranged informally. Relatively higher information and search costs are thus involved. Observable attributes are expected to exert significant impacts on rent as tenants mainly rely on their availabilities when they assess the SDUs. For SDUs with shared sanitation facilities, the inconvenience escalates with the subdivision density, which is expected to cause negative impact on rent. The results confirm the hypotheses that basic and observable housing facilities are important rent determinants and tenants have to pay higher rent to mitigate the inconvenience of shared facilities. This study is a pioneer attempt to give a fuller account of the SDU market landscape, providing empirical evidence about the effects of housing facility trade-offs of this informal rental market. Tenants are expected to make more compromises on housing qualities if the shortage of affordable housing worsens. The findings provide far-reaching implications for future research on housing values and affordable housing design.

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Notes

  1. ‘Sandwich class’ refers to households whose income is beyond the eligibility threshold of any public assistance, but there is no room for them to purchase a decent home at full market price (Kwong 1994; Ying et al. 2013).

  2. Group oriented leasing is defined as sub-dividing one housing unit into two or more smaller rooms for rental purpose or renting the bedspace (without partition) in the housing units (Zhang and Jin 2015a, b).

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Acknowledgements

This study was developed into a knowledge transfer project of The Chinese University of Hong Kong. The collaborative organizations include Platform of Concerning Sub-divided Flats and Issues in Hong Kong, The Hong Kong Council of Social Service, I. CARE Programme of The Chinese University of Hong Kong and Land Justice League. Their valuable assistance is much appreciated.

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Authors and Affiliations

  1. Department of Real Estate and Construction, Faculty of Architecture, The University of Hong Kong, Hong Kong, China

    Ka Man Leung

  2. Real Estate Development and Building Research and Information Centre, Hong Kong, China

    Chung Yim Yiu

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  1. Ka Man Leung
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  2. Chung Yim Yiu
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Correspondence to Ka Man Leung.

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Table 5 Assessment criteria for SDU qualities
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Leung, K.M., Yiu, C.Y. Rent determinants of sub-divided units in Hong Kong. J Hous and the Built Environ 34, 133–151 (2019). https://doi.org/10.1007/s10901-018-9607-4

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