Is leaving things to the market a good move? It seems like National Development Minister Khaw Boon Wan is doing just that, in terms of defining apartment size.
There are no plans to impose a minimum size on increasingly popular shoebox flats, according to National Development Minister Khaw Boon Wan yesterday.
Mr Khaw wrote on his blog that he is inclined to let market forces determine if such flats, which are smaller than 500 sq ft, have a place in the property spectrum. A standard HDB three-room flat is about 700 sq ft.
‘Some analysts wonder aloud if buyers know what they are in for. Some have suggested that the Government should step in to impose a minimum size,’ the minister noted. ‘My instinct is not to second-guess the market. Some shoebox units do add to the diversity of housing options here. But we are closely watching its development.’
But he did sound a warning, urging buyers to ‘go in with eyes open’.
Mr Khaw wrote that while 1,100 flats have already been built, the figure is expected to balloon to 3,800 by 2014.
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Newer shoebox projects are also in the suburbs, with their appeal to tenants untested, he said, adding that it is important for potential buyers to weigh the benefits and risks carefully.
Sales of shoebox flats have increased more than six times, from 300 units in 2008 to 1,900 last year. They represented 6 per cent of new private home sales in 2008, but 12 per cent last year.
Their small size also means higher per sq ft prices but low overall values – often below $1 million – providing an affordable quantum for buyers.
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In fact, Singaporeans made up 80 per cent of shoebox home buyers, presumably making the purchase as an investment in the hope of renting it out to expatriates or singles, Mr Khaw said. He added that some developers who bid high prices for land sites might be planning to build shoebox units, which will further add to the build-up of stock.
While the Government will stay its hand for now, the minister touched on the roles that different stakeholders can play – to empower home buyers and to better assess the situation.
‘On our part, we are requiring developers to give buyers an accurate representation of the units they are buying, both within the showflats and in the sales materials,’ he added.
‘Analysts can also help refine their analysis by including separate analyses for each category of housing products. Comparing price per sq ft for different products is like comparing apples with oranges.’
The Urban Redevelopment Authority told The Straits Times yesterday that these units accounted for only 8 per cent of all sale transactions in the first half of this year, and so there is no need for a separate index for shoebox flats.
Experts say tenant demand for shoebox flats remains healthy due to the strong economy and tight labour market, which has brought more foreigners to Singapore.
Global Property Strategic Alliance chief executive Jeffrey Hong said a shoebox unit in Balestier can be rented out for about $2,300 to $2,600 a month.
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He expects the upcoming supply – especially for larger shoeboxes of more than 400 sq ft – to be absorbed should the economy continue to power ahead.
But Mr Nicholas Mak, head of research at SLP International, reckons that shoeboxes will be the first casualties if rental demand falls: ‘The segment itself could become a bubble drawing in overly optimistic investors… They might find that their initial expected returns will not be met.’
Civil servant Kenneth Wong, 37, said he bought a shoebox unit as it was small and easy to maintain. He has lived in the 450 sq ft apartment at Thomson V One in Sin Ming Road for the past two years.
‘I don’t really find the place claustrophobic or unliveable, I think it’s suitable for singles who don’t have much to clean up,’ he said. ‘Personally, I like it but, if prices go down, I would be open to moving out to have a bit more space.’
Source: The Straits Times © Singapore Press Holdings Ltd. Reprinted with permission.
Editor’s Commentary:
As the population is on its wayto the 6 million mark, are apartment sizes becoming smaller? Land is certainly not growing and there is only that much we can reclaim. Will whole families be staying in a 450 sq ft shoebox unit be the norm in ten years’ time? Or will the property customers fight the developers and market on this?
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Great post!