Shoebox apartments. These small units certainly pack a big punch when it comes to the impact on the Singapore Residential Price Index (SRPI), as analysed by the National University of Singapore (NUS). Find out just how they are knocking the competition out of the ball park.
Sims Ede in Geylang is one of the many shoebox apartment blocks coming up.
Finally, an index has been minted that monitors price changes for shoebox apartments. And it shows what market players have observed for some time now – that price increases of shoebox apartments have been outpacing gains in overall apartment prices since the property market recovery following the global financial crisis
But shoebox apartments have made overall home prices here more volatile, with sharper price gains than larger homes. This is a key finding in an analysis by the National University of Singapore (NUS) real estate department.
An index tracking per sq ft prices of these tiny units of about 500 sq ft or less has rocketed up 62 per cent since March 2009, its post-crisis low. This outpaced the 51 per cent rise for the overall Singapore Residential Price Index (SRPI) over the same period.
More recently, NUS data found that from March to May, small unit prices rose 7 per cent. This is again higher than the 3 per cent gain by non-landed homes in central and non-central areas, excluding shoebox homes.
This is the first time the NUS SRPI – which tracks a basket of completed non-landed projects – has extracted small homes in its analysis of resale prices.
Where the Singapore Residential Price Index data is analysed. Image from the Institute of Real Estate Studies, NUS.
Associate Professor Lum Sau Kim of NUS’s Institute of Real Estate Studies and Department of Real Estate, who leads the group that compiles the index, said that the quicker psf price gains for small homes would have pushed the overall index up marginally. Although shoebox units make up a seemingly insignificant 0.4 per cent of the number of units in the index’s basket, 5 per cent of the basket’s residential projects have shoebox units.
Skysuites17 on Ah Hood Road in Balestier boasts condo facilities with smaller apartment units.
‘The pricing of these small units exerts a two-way ongoing influence on the entire market,’ Prof Lum said. She also observed that while shoebox prices had tracked the price movement of homes in the central area previously, price gains for the shoebox segment were now leading price gains of central units.
She also added, ‘this is important market information which will help us understand the price behaviour of different segments of the market’.
Experts say shoebox prices have outpaced other segments as buyers focus on the overall price rather than the psf price, allowing developers to raise prices more easily.
SLP International research head Nicholas Mak cautioned that buying shoebox units is a riskier investment as a quicker price gain during a property boom could mean a quicker price drop should the market turn.
‘The cooling measures, such as preventing private home owners from buying HDB flats and tighter financing rules, have also increased demand as investors now turn to shoebox units, usually with a smaller quantum of less than $1 million.’
When asked about the possibility of publishing a separate index for small homes, an Urban Redevelopment Authority (URA) spokesman said transactions of shoebox units in both the primary and secondary market accounted for only 8 per cent of all sale transactions in the year’s first half.
Smaller space to call your own, but enjoy condo amenities at the same time. Interweave in Kim Keat.
‘Given the detailed information on individual private housing units sold that is already available to the public on URA’s website, there is no need at this moment for URA to publish a price sub-index specifically for shoebox units,’ he said, but added that the URA would not rule such an index out in the future.
The new sub-index for small apartments is based on a basket of completed apartments, whereas most of the action in the shoebox apartment market has been at new property launches. However, Prof Lum says that ‘prices for new launches of shoebox units will also have an impact on prices of completed small apartments in our basket’ ‘Come December 2011 when we reconstitute our basket, we will have an opportunity to have a larger representation of completed shoebox units.’
Source: The Straits Times © Singapore Press Holdings Ltd. Reprinted with permission.
Editor’s Commentary:
With the current housing and property situation, is investing in a shoebox apartment really thinking out of the “box”? Or will it just lock you in a small box when the tides change? And who knows when that will be.
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