Shoebox apartments – Supply over demand?

Shoebox apartments – affordable total quantum price, relatively easy to rent and maintain, limited numbers. That used to be the case when these small units were first marketed a couple of years ago. But as developers caught onto the small apartments trend and churned out more of these units, their numbers have increased significantly.

Parc Centros private condominium on Punggol Walk.

Parc Centros private condominium on Punggol Walk.

By 2017, the number of these shoebox apartments with floor area of approximately 500 sq ft, will rise by another 700. Instead of being mostly concentrated in the city and prime districts, they will now be in the Hougang, Punggol and Sengkang areas in residential projects such as A Treasure Trove, Bartley Residences, The Promenade@Pelikat, Parc Centros, River Isles, Jewel@Buangkok and La Fiesta.

Expatriates are usually keen on renting out properties near their workplace, usually near the Central Business District. But as businesses are moving out into the various regional commercial hubs, so may their search for rental properties. What may however be deterring them from renting out these small studio apartments could be the rental prices.

Rental prices of small studio apartment are now at $2,000 to $2,200 per month, down from $2,600 in 2013. These prices are now nearing that of renting out an entire HDB flat, which could prove to draw tenants away from the private property rental market. Could this then in turn increase the demand for resale HDB flat?

Property auctions see more action

In light of the declining property market, more properties are finding themselves placed under the hammer at property auctions.

THeWaterlineLowered mortgage ratios, decreasing rental demand and increasing supply have all affected the property market. Most of the 180 units put up for auction in the 3 months up to 30 June have mostly been due to mortgagors defaulting on their mortgage payments. Industrial or residential properties alike have found it difficult to meet their mortgage payments if they were relying mainly on rents, especially as it has become harder to command leases at a level expected during the peak of the market.

Smaller private non-landed units such as studios or shoebox apartments were also facing some market pressure as their popularity waned. Supply of such units, or simply more private condominium apartments in general, has possibly exceeded demand and such units are now more commonplace. The next thing to budge would be rental and then sale prices.

Even as property loans become harder to secure, with the tight loan limits and hefty stamp duties implemented as part of the property cooling measures, the last hurdle that mortgagors have to cross would be the increasing interest rates.

For buyers and property investors, the proper might be a possible avenue to consider in their property search.

Will shoebox apartments be 2015’s top seller?

Despite a rise in the number of available shoebox apartments over the last year, the fall in prices of this property sector was the lowest amongst all the other completed non-landed private apartments.

JurongLake_URA

Photo credit: Urban Redevelopment Authority (URA)

These small units up to 506 sq ft in size, especially if situated in good locations, will this segment continue to do well this year despite a 4 per cent price decline in 2014? Made popular in 2009, shoebox units in the prime districts such as those in the city centre or city fringes, were snapped up well and fast over the past 5 years. So much so that developers launched projects with shoebox units which made up as much as 80 per cent of the total number of units launched outside the city centre region.

Though these small studio-size units are commonly popular in highly populated cities such as London, Sydney, Tokyo and New York, will they work in suburban Singapore? With new regional hubs such as Jurong and Woodlands coming up, and even more in the next 10 to 20 years under URA’s redevelopment plans, it could possibly be so as businesses fan out from the city centre into these regions, bringing with them expatriates and their housing needs.

For the current year, property experts are waiting to see the markets’ response to resale shoebox units as more of these developments attain their TOP (temporary occupation permit). The most recent additions to the market are The Promenade@Pelikat and The Hillier. It could be a battle between centrally located shoebox units and slightly larger two-room apartments outside of the city.

Prices remain low for private properties

With a drop of 0.3%, private home prices have slipped down the slope a little further in July. Property experts are taking this dip, 2 months in a row, to mean that prices could be stablising.

Bijou1Despite four new launches of private apartments Bijou, City Gate, Robin Residences and Citron Residences, which also meant a spill-over effect on surrounding resale properties, the market remained soft. Shoebox apartment units saw the largest difference, with a 0.8 per cent drop, with the non-central regions showing the most promise. Prices in the central region fell 0.7 per cent.

The biggest factor suppressing prices is the TDSR (total debt servicing ratio) framework. Since the authorities have expressed the fact that this cooling measure will not be reduced or removed anytime soon, the property market may see more slipping and sliding for now. The new year may bring a breathe of fresh air with new launches and some new properties reaching completion, though that could also mean a further dampening of the market with a larger supply and a diminishing demand.

Resale homes are expected to receive a larger blow as they often have older designs in comparison to the newer units and property buyers could be drawn by the discounts offered by developers.

Commonwealth – Properties not so common

Considered on the city fringe, just a little way off Alexandra which is an area popular with expatriates, Commonwealth may see renewed buyers’ interest as new private condominiums enter the mix.

The latest launch is Commonwealth Towers on Commonwealth Avenue. It will be officially launched on May 1 and is expected to be priced at $1, 600 to $1, 800 psf, it is relatively more expensive than similar properties in its vicinity, such as Queens condominium, Alexis, The Metropolitan, Ascentia Sky and The Anchorage private apartments. These are older residential developments and units are available on the resale market. Rental demand has been strong, though property experts are expecting competition to heat up once the newer condominiums are up and running.

The AnchorageAccording to URA figures, rental prices at the Queens averages at $4.32 psf per month. Sale prices were at $1, 350 psf. The Alexis commanded even higher prices at $6.65 psf and units sold at an average of $1, 939 psf, possibly because at 2 years old,  it is much newer than the Queens which was completed in 2002. Also, a third of the 293-unit The Alexis are shoebox apartments and are easier to rent out.

Alexis @ Alexandra CondoHowever the tightening foreign workforce rulings and immigration regulations may prove challenging for landlords looking to rent out their property especially with the rise in new units in the Redhill and Tiong Bahru area. Competition will always be present, but good location, providing attractive rental conditions and ultimately good timing may beat all that.

2013 closed with weak demand for resale homes

Although a 0.1% rise was registered, the last quarter of last year saw a resale private home market which was relatively quiet, and where demand was low. But industry experts were none too ecstatic about the rise, with most recognizing that this might be a mere “technical rebound” which will not be sustained.

The Montana1Homes in the central region which sold above the median market prices could have accounted for this rise in numbers. A few units at The Montana in Jalan Mutiara for example, sold at $1, 832 to $2, 130 psf. The market prices were at an average of $1, 600 to $1, 800 psf. Another high-floor unit at The Orchard Residences also went at $4, 312 psf, above the $3,600 psf market price, possibly due to the rarity of the unit.

The largest dip came from the shoebox apartments sector. For these small apartments of less than 500 sq ft, which were the best sellers of earlier in the year, a 0.6 per cent drop could signify a saturation of the market with these types of units, and where rental demand may not yet make up for the sheer number in existence. As new non-landed residential developments flaunt their remaining units, resale units in the suburbs may be forced to lower seller expectations. Will 2013 purely be a buyers’ market?

Singapore Re-zoned for homes

In the next decade, be prepared for half a million new homes as land everywhere around the island will be re-zoned to home Singapore’s growing population. With plans for most of them to be in the Paya Lebar and Greater Southern Waterfront areas. In the Holland Village, Kampong Bugis and Marina South areas alone, 14, 500 new homes are expected to take root.

Tampiens North

In the greater scheme of things, 3 other major districts are expected to see a boom in residential properties, both public and private:

And planning even further ahead past 2030, the Paya Lebar area will welcome up to 500, 000 new homes as there are plans to move the Paya Lebar airbase to Changi East, yielding 800ha of land for re-zoning purposes.

BidadariThis shift of land use and rearrangement of population across the island is all part of a growing country’s historical progress, and depending very much on how Singapore’s economy performs in light of the global situation will determine other policies which may in turn affect the direction property growth takes. But in the meantime, prospects seem positive and for a quick investment turnaround, shoebox apartments in the suburbs are still considered one of the most profitable investments.

Resale home prices falling

As the supply of new homes continue to serve up options for property buyers, resale homes are somewhat relegated to the back seat as they compete to shine in the property market. The recent Singapore Residential Price Index (SRPI) numbers show that overall non-landed private home prices dropped by 2.1 per cent in October.

Industry experts are seeing an increasingly experienced pool of home buyers and investors who are much more price-sensitive than before. With so many options to compare between, buyers are often keen on newer establishments and tend to hold off looking for a resale unit, preferring instead to look out for new launches in the same area.

Sky Habitat condominium in Bishan.

Sky Habitat condominium in Bishan.

And with property developers offering competitive selling prices, new units are the bees knees especially for young families, professional couples and those looking for a good investment opportunity.  Sky Vue and Sky Habitat in Bishan are examples of recent new property launches which were offering discounted units and affordable and highly attractive prices. And should they be looking at similar resale units nearby, they are expecting them to be priced at least 20 per cent lower.

One other possible reason for the decline could be a weakening rental market. As immigration policies continue to tighten, and developers try all means to increase sales of their newer launches, resale homes might have to be satisfied being the wallflower for now.