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17 Apr

The case of the shrinking condominiums

Unit size, that is. It used to be that a one-bedder in 2008 measured an average of 678 to 947 sq ft. From 2010, they measured 538 to 678 sq ft. When the minimum becomes the maximum, it may be the sign of times.

 

One of the latest new properties offered - Natura condominium at Hillview Terrace.

Natura condominium at Hillview Terrace.

Property developers have been shrinking condominium sizes to make them fit into the pockets of buyers. And these are not restricted by area, across the board, homes are getting smaller. Shoebox apartments have been the focus these past couple of years, but now, it’s not only the studio apartments which are put under the microscope. Two and three-bedroom units have also been getting the slice. For example, a three-bedder in Natura at Hillview Terrace measures 635 sq ft, that’s even smaller than the smallest one-bedder unit launched in 2008. And before 2008, the same would have gotten you 1,500 sq ft.

As Singapore’s population rises, the challenge to contain all in livable conditions fall not only in the hands of the Government, but also on private developers. High land costs, labour costs, material costs have all contributed to the situation. It’s either higher prices or smaller spaces. Or both. But does this mean buyers now pay less? As competition increase, property developers find themselves fighting for the same crowd of buyers, and trying to put out products which fit into their price points.

Midtown Condominium at Hougang.

Midtown Condominium at Hougang.

Most buyers are willing to fork out $1.5 million for their first or second home, especially since loan limits have been tightened in the most recent round of property curbs. But experts are less concerned about the small size of shoebox apartments than two and three-bedders. They have voiced their concern that while it is reasonable for one person to live in a 500 sq ft studio space, it may not be so for small families to live within 600 to 700 sq ft. And these not only apply to private condos, but also to ECs (executive condominiums).

The trend looks set to continue, but is there any more space left to shrink? What quantifies “livable” space and are Singaporeans getting the quality of life they need?

20 Mar

Do singles like their new HDB Option?

This would be the option of  being able to buy new flats directly from HDB. This scheme is likely to begin in July this year and some are already getting ready to jump in the queue. Others however are skeptical of the size and location constraints, and also the 2 to 3-year wait before getting your keys to the flat.

Oleander Breeze BTO Flat in Yishun.

Oleander Breeze BTO Flat in Yishun.

This may impact the resale HDB flat market somewhat, but perhaps mainly the three-room resale flats. Singles make up a good 15% of the resale flay purchases, but they usually go for smaller units and thus the bigger units could still be tagging themselves to high valuation plus cash-over-valuation figures months down the road.

For the moment, singles earning $5000 and below per month (that is the other catch in the new rulings allowing singles to purchase new HDB flats) only really have two options – a three-room resale flat or a shoebox apartment. Many who bought shoebox apartments were usually investors rather than owner-occupiers. Some may also be willing to fork out for a resale flat to put a roof over their heads immediately rather than wait out the few years it takes between getting your flat on paper and literally having the keys in your hand. Build-to-order (BTO) flats usually take about 2 to 3 years to build.

Without a shared household income, singles are also largely affected by age and income spectrum when it comes to the loan amount they are able to apply for. For example a single above the age of 40 though earning $5,000 will only be able to get a loan of $255, 000 to $300,000 as compared to a single aged 35 and earning $4,000 a month who will be able to get a loan of $265, 000 to $310,000. In a flash, this puts limitations on the type of property and location of the property singles are able to purchase.

So how will the resale HDB flat market really fare following this change? Will prices of resale flats drop even further or will owners simply continue to hold on to their property indefinitely, whilst waiting for major shifts in the private property market to trickle down?

11 Mar

Singles will be allowed to buy new HDB Flats by July

This rang clear in the National Development Khaw Boon Wan’s message last Friday. And many are already cheering.

Currently singles above the age of 35 are allowed to buy HDB flats, but only from the resale market.

Currently singles above the age of 35 are allowed to buy HDB flats, but only from the resale market.

There are caveats however.

  • The age limit for singles buying flats has not changed, resale or new, you have to be 35 years of age before you can buy a public housing unit.
  • Singles can only buy 2-room flats . These flats are either 375 or 485 sq ft in size. This is just slightly smaller than some studio apartments or shoebox apartments in private condominiums.
  • There is an income cap at $5000.
2-room Bukit Batok HDB flat for sale.

2-room Bukit Batok HDB flat for sale.

A new 2-room HDB flat in Punggol went for around $100,000 last year, and that was before available grants kicked in. Currently singles can apply for a $15, 000 HDB grant if they earn $5000 or less. Mr Khaw has said that they recognise that those earning under $5000 a month will face difficulties owning a home in Singapore.

Part of the reason behind pushing out this new ruling by July this year is that the increased supply of new HDB flats have cleared “a backlog of applications from married couples seeking a Housing Board home for the first time”.

Is this new move a response to Prime MInister Lee Hsien Loong’s National Day Rally speech last year, where he acknowledged that singles have housing needs too?  Are these restrictions fair and what are the possible loopholes? Will this cause a drop of resale HDB flat prices and how will that change the landscape of this market?

6 Mar

Suburban location but Prime rental prices.

Even though these apartments and flats are not in the prime central locations, they are holding their own in terms of home rental prices.

Yishun Emerald condominium.

Yishun Emerald condominium.

Mass market private condominiums, especially those in the East and North-east districts are in demand and thus driving prices up. Median monthly rents rose 2.9 per cent to $3.13 psf in Q4 of 2012. And as expected, homes close to MRT stations and near international schools fair better with tenants. And smaller homes, because of their higher psf prices, faired exceedingly well. Apartments in District 28 (Yio Chu Kang and Seletar), have been rising particularly fast to the current $3, 400 per month. Homes in District 21 and 19 performed equally well.

Smaller-size units, and perhaps shoebox apartments, were the top sellers in January and from the way more HBD upgraders are snapping up units here, they may be this year’s hot property. With the government’s tightening noose on immigration policies, HDB flat rentals may suffer first, since new immigrants will tend to fall in the PMEB category of professionals, managers, executives and technicians and their families. Singles looking to venture into the property market also make up a large part of the pool of suburban small apartment buyers.

Savills Singapore reseach head Alan Cheong has observed that most renters have a budget of $2500 to $4000 per month and suburban shoebox units or three-bedders fit right into their wallets. Older apartments with a larger floor space may be priced at the same range as newer but smaller flats.

14 Dec

The property rent vent

Landlords are finding themselves at the mercy of tenants, some having to slash prices to find one. The diminishing pool of high-flying tenants is the main cause. More so for owners of prime district high-end luxury condominiums though. The expatriate working force have smarten up and many are now opting for mass market homes further away from the city centre and at lower prices. And especially with the sudden boom of new condominiums all around the island, things do not seem to be getting any easier for these city centre private condominiums.


According to URA’s data, private housing rents were up 17.9 pre cent in 2010 but only a paltry 3.8 per cent last year. And for this year, experts are expecting it to maintain last year’s increase at best. The only sprout seems to be Geylang, which has come up as one of the more popular areas for rentals of cheap shoebox units. The link to the changes in the immigration policies here as well as the exit of some major multi-national companies, is stronger than we think.

With the government reining in home mortgage spending and possibly rolling other cooling measures one can only guess at, careful consideration and calculation may prevent you from getting into a property investment situation you are unable to get out of. So if you’re thinking of investing in a private home in the current situation, do note that tenants now favour mass market suburban homes. Will this eventually affect private home prices, and then resale HDB flat prices?

14 Nov

Property prices heading skywards

Cooling measures have met their match as the property market here heats up. Healthy sales from recent new property launches such as eCo in Bedok South and Sky Green off Upper Paya Lebar Road are indicating a rebound in property sales following a slight dip after announcements of the most recent property cooling curbs which were more to safeguard the banking system from excessive lending rather than deter investors or buyers from snapping up properties.

Skyline ResidencesAs long as investors still have sufficient funds to afford the cash upfront payments for properties, and have holding power to support their purchases, the buying may continue well into the next year or two. Instead of a complete stop, they could simply be turning their attention to smaller, more affordable units. Will shoebox apartments benefit from this change of direction?

Areas which showed the most positive sales were homes in the city-fringe and suburban areas. They held a average rise of 4.5 per cent and 4.2 per cent in October. Industry players cite rising construction and land costs as one of the reasons for this continued price hike. Corresponding rise in prices of resale HDB flats may have also provided a boost in the suburban homes market.  The narrowing price gaps between city-centre and suburban homes might be the next trend to watch, as that could very well be the sign of the next property bubble. Whether it will burst and when is a path to be lightly treaded.

6 Nov

Fewer Shoebox apartments in Suburban districts

Certain suburban property districts now have a quota of how many and how small studio apartments or shoebox units can be built within specified sites. These areas include Telok Kurau, Joo Chiat, Jalan Eunos and Kovan. The central districts are unaffected.

Palm Oasis Condo2

Property developers however were not in a rush to capitalise on sales or rush the submission of building plans before the cap kicked in on 4 November. The Urban Redevelopment Authority (URA), has apparently already begun clamping down on the number of new shoebox units since last year.

Is this a timely move by URA, and will the existing shoebox apartments become rare commodities since fewer will enter the market from hereon?

Perhaps not so soon, as this property type is still very popular with home buyers and investors. And as the society becomes more diverse, there will continue to be a demand for them, either for sale or rent. Land cost in Singapore is increasing, despite the government’s reassurance that there is an ample supply to go around. This, plus demand, could be deciding factors in the pricing of new residential units.

15 Dec

Thinking of Buying a Shoebox Unit? The Districts You Might Want to Short-List

While the term “shoebox units” was virtually unheard of even by professionals within the real estate industry as recent as 5 years ago,this term has become a part of many Singaporean’s common lingo today.

With the rapid increase in Singapore’s population from approximately 4.4 million in 2005 to more than 5.18 million today, the shoebox unit is one of the solutions to coping with the growing housing needs of a larger resident population. These units, defined by National Development Minister Kaw Boon Wan as having an area of less than 500 square feet, made up 12% of new private home sales last year. The shoebox trend is not restricted to just the private market alone – HDB has also jumped onto the bandwagon, as seen by the increased number of studio flats released, and shrinkage of floor areas for new BTO flats recently constructed.

1. An Abundance of Shoebox Units

Compared to just 7 years ago, the number of shoebox units snapped up by eager buyers increased by a mind-blowing 79 times, from just under 30 in 2004 to more than 2,390 units during the last 12 months (Oct 2010 – Oct 2011). Certain districts proved more popular than others, with District 15 (Joo Chiat, Katong, Marine Parade) taking up 20% of the share of all transactions of shoebox units. Following close behind was District 14 (Geylang, Eunos and Paya Lebar) accounting for 17% of transaction volume.

Districts with Top Share of Shoebox Transaction Volume

2. CBD Shoebox Units Command the Highest PSF

Given the abundance of shoebox units on the market, one question remains: How does a prospective buyer look out for the “best deals”, or units which would enjoy strong appreciation in future? When we took a closer look at the movement of transacted shoebox unit, what stood out the most was that not all shoebox units are created equal.

Districts with Shoebox PSF Greater than $1,000

Only 13 districts in Singapore were able to hit the $1,000 PSF mark, with District 1 (Marina Bay and Raffles Place) commanding the highest average transacted PSF at $1,923. District 9 came in a close second, with an average PSF of $1,837. It should be noted that there is a sharp drop in the PSF which other districts other than District 1 and 9 are able to command, as the next highest PSF is almost 10% less than that of District 1 and 9.

Districts 21 (Ulu Pandan and Clementi) fetched one of the lowest average PSF, at $618. Although these 2 areas are generally considered desirable by many Singaporeans, the lower PSFs may reflect a preference for bigger family-sized flats rather than shoebox units in these suburban areas.

3. Up & Coming Shoebox Areas To Watch

While shoebox units in the CBD area are well ahead of the pack, a number of up and coming neighborhoods are showing their potential for steady appreciation down the road. District 20 (Ang Mo Kio, Bishan and Thomson) fetched an average PSF of $820, which is approximately 30% lower than that of District 13 (Macpherson and Potong Pasir). Given the strong appeal of areas close to town such as Ang Mo Kio, the PSF of shoebox units in these estates may well rise in the near future.

4. Future Supply & Demand for Shoebox Units?

So what is the outlook on the future of shoebox units in Singapore? For sure, the Singapore demographic trends of a rapidly aging population, combined with a lower birth rate, do point the way toward smaller household sizes in the future. In addition, given the URA’s announcements on the master plan to increase the country’s population to 6.5 million by 2020, it may be likely that continuing higher immigration rates will fuel the move toward smaller units becoming the norm – rather than the exception. Developers, of course, are one step ahead, with many already choosing to release higher percentages of shoebox units in recent launches, hence reaping the attractive profit margins (as much as 20 – 30% higher) from the higher PSFs that shoebox units currently can command.

While most of us would enjoy a larger living space, it looks like the trend of shoebox units is set to continue. The question then remains: Is a Shoebox Unit a good investment? Not all shoebox units are created equal, and investors would be well-advised to carefully examine the past movement of shoebox units transacted prices before buying.

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