Shoebox units: A "hard sell"..?

Analysts have said buyers of shoe-box apartments may have difficulties selling them in future, even though their current rental returns of about 5% make such apartments popular with small-time investors.

Although they are small in size, they are priced at about $600,000.

Analysts added that at this price, buyers are still able to afford them.

In one of his recent blog posts, National Development Minister Khaw Boon Wan urged buyers to consider the risks and returns when buying shoe-box apartments.

Analysts said more shoe-box apartments will be built by 2013, possibly leading to a glut.

They said the main attraction of such apartments is their prime location, including proximity to town areas and MRT stations.

If these apartments sprout in less-than-ideal locations, it may be harder for investors to sell them off later.

Analysts Channel NewsAsia spoke to pointed out if the per-square-foot (psf) value of the apartment is already high, investors might find it harder to sell it off at a good profit.

But some buyers – such as retiree Linda Teo – are still optimistic about the profits they can reap.

Madam Teo and her husband bought a shoe-box apartment near the Farrer Park MRT station about two-and-a-half years ago.

At about 581sqft, her apartment is smaller than a three-room flat.

She said despite having only just received keys to her unit, she already has people offering to buy it from her at 20% more than her purchase price.

But Madam Teo said she intends to keep it as an investment.

“I think if I keep the money in the bank, the interest is quite low, I’d rather put it in a property for my children, for their future,” she said.

“Currently, the rental for this project is about $3,000 to $3,500 per month. There have already been a lot of interested tenants who have come to view the place. I think it shouldn’t be a problem.

“My view is, at this moment, we do have a lot of buyers who have approached us, who want to buy this project.

“Even two to three years down the road, if the demand is not there, we’ll decide to keep this for the children, so I don’t see this as a problem.”

Source: Channel News Asia

Then again, 581sqft can hardly be considered a “shoe-box” these days… especially with more and more new projects rolling out 300+sqft units.

Collective sales market to remain healthy: Credo

Some $1.7 billion in collective sales have been transacted so far this year.

According to property consultant Credo Real Estate, the figure is almost the same as the collective sales transacted last year.

One of the latest transactions is a 40-unit walk-up apartment development on River Valley Road, which fetched $70.5 million.

Credo said successful deals over the past 18 months have been relatively small.

And the buyers are mainly small to medium-sized developers who are unable to bid for the larger government residential sites.

Credo’s managing director, Karamjit Singh, said each of the top five deals ranged from $137 million to $214 million.

In 2007, the top five deals were worth over half a billion dollars each, and some $11.4 billion in collective sales were transacted then.

Mr Singh said: “The outlook for the collective sales market for the rest of 2011 is positive.

“Owners are becoming more realistic on reserve prices and there is sustained interest from developers.”

Source: Channel News Asia

Well, Credo have good reason to be optimistic – they have had their hands full closing en bloc sales so far this year!

Enbloc News: 401 – 414 River Valley Road sold for $70.5 million

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A 40-unit walk-up apartment at 402-414 River Valley Road has been successfully sold en bloc for $70.5 million to Alliance Land.

This translates to a land rate of about $1,139psf ppr, with a gross plot ratio of 2.8 for the 22,000sqft site.

If the 10% gross floor area for balconies is included, it will work out to $1,035psf ppr, at a gross plot ratio (GPR) of 3.08.

According to marketing agent, Credo Real Estate, a new development built on the site can potentially yield an estimated 130 apartment units, averaging 500sqft each, depending on layout and configuration.

Credo said the project is suitable for a boutique development with small apartment units, which will be popular with both local and foreign professionals and investors.

Owners of the District 10 property stand to receive gross sale proceeds ranging between $1.75 million and $1.77 million each.

The sale is subject to the approval of the Strata Titles Board.

The site has a total gross floor area of about 68,000sqft, including the 10% gross floor area for balconies.

The existing development is understood to have been built in the early 1960s, making it part of the first generation of flat developments built in the post-colonial era of Singapore’s history.

Tenure for the site is rather unique – at 999,999 years with effect from 1962.

Source: Channel News Asia
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