Weather forecast for shoeboxes: Stormy with a likelihood of flood!

According to a ST report today, owners of shoebox apartments outside of the city centre may be in for a fix next year. This is because of the 53,900 new condo units expected to come onstream within the next 30 months, most will be small or shoebox apartments with a floor area of up to 506sqft.

The greater choice available may spell bad news for suburban shoebox homes, which have a limited appeal given their location and relatively cramped living space.

Shoeboxes became popular in 2009 and of the 12,097 units sold since then, about 47% were in the city fringe areas and around 37% in the suburbs. There are no official figures available on the number of shoebox units that are on the market, but URA’s projection in September 2012 put it at about 2,400 units as at  2011, with the figure rising to 11,000 by the end of next year.

These small homes featured heavily at newly launched projects from 2009 to 2012, including the 293-unit Alexis in Alexandra Road, the 138-unit Parc Imperial in Pasir Panjang Roadand the 72-unit Suites @Guillemard in Lim Ah Woo Road. Although these apartment type tend to sell at a higher psf because of their small size, they were popular with investors due to the smaller total quantum, which make them more affordable. 

Rental yields of shoebox units typically range from 3 – 4%, higher than the 2 – 3% yields for residential developments islandwide. However, rents for shoeboxes are expected to soften in line with the flood of newly completed condos. 

Outlook for capital appreciation for shoebox units also appears bleak – the median prices (psf basis) have risen by about 24% in the four years since the Q2 2009. Median prices fell by 5% against a 2% depreciation for non-landed homes after tighter property financing rules were imposed in Q2 2013. 

Despite so, there were 710 shoebox units sold in the first half of the year.

Followers of SG PropTalk will probably know how big of a fan (NOT) the wife and I are when comes to shoeboxes. And we have posted quite a bit on this subject since 2011 – just key in “shoebox” on our “Search this Blog” function to find these. Our previous blog posts had also generated numerous comments and even debates about the liveability and long-term prospects of such unit type. 

While we agree that shoeboxes will continue to see some demand from singles and DINKs (double income, no kids), and probably expats on local employment terms, we have always been of opinion that the number of units that have come/are coming onto the market since 2009 far exceed the actual demand for such units.  

We also firmly believed that majority of shoebox units that were purchased since 2009 were not for self-stay – we do not have the figures to substantiate our claim so we are prepared to “agree to disagree” on this point.

For existing owners who have bought shoeboxes for investment purposes, they will be competing for rentals with not just the brand new units that are expected to flood the market next year but also with the bigger apartments. Given the current depressed state of the rental market, which looks to get worse next year, landlords are likely to drop asking rentals to get tenants rather than leaving their apartments vacant. This will sure to put additional downward pressure on rental yields for shoeboxes – given a choice between a shoebox and a bigger apartment at about the same monthly rent, it is a no-brainer as to which a potential tenant will opt for. 

And to add salt to injury, existing owners – especially those whose units are outside the city centre – may find it near to impossible to resell their units profitably, thus fulfilling the prophesy of a “cannot rent, cannot sell” scenario that we made back in 2011-12…

 

 

 

The smaller the unit, the cheaper the rent? Not necessary so!

Rental for shoebox units are not necessarily cheaper than small apartments (i.e. those above 500sqft) within the same development. This is according to rental data from URA.

 

As an example, one can rent a shoebox unit of 300 – 400sqft at Alexis for between $3,200 to $3,500 per month. However, he can actually get a larger unit in the same development for around the same amount of rental.

 

The same scenario are currently being played out in other developments around Singapore as well.

 

The higher rental yield and per square feet (psf) rental commanded by shoebox units tend to be the market norm. In general, psf rental for small apartments are about $1 higher than those of medium and larger-sized units. For shoeboxes, the difference can be up to $3 higher. The overall average rental at Alexis, for example, is $4.90psf. However, average rental for units that are 600sqft or smaller is as high as $7.30psf.

But given the current depressed rental market, the difference in asking rent between shoeboxes and their larger counterparts are becoming smaller. As such, owner of shoeboxes are finding it increasingly challenging to rent out their units. Some savvy tenants have resorted to renting larger apartments and sub-letting one or two bedrooms in order to subsidize their rental cost. This has resulted in a larger number of empty shoebox units.

 

And the situation may be getting worse. About 10,000 new shoebox units are expected to be completed from 2014 to 2017.  Going forward, property consultants say that rental for shoebox units may likely fall between 10 – 15%.

Looks like stormy seas ahead for shoebox investors seeking rental…

 

First there’s 华语cool. Now it’s Shoebox cool..!

The hype over shoebox property units seems to have cooled down.

Sales transactions in these small private apartments have fallen by 46% in the second half of 2012.

In the second half of 2012, some 1372 units were transacted compared to 2539 units in the first half of last year.

Experts cited fewer launches as developers focus on building bigger units to meet demand.

Still, analysts said there is always demand for such units that are generally smaller than 700sqft.

Demand for shoebox units was the highest in the city area and its fringes last year and this was translated to large price increases.

Data analysed by Knight Frank showed that prices of shoebox units in the city fringes or Rest of Central Region (RCR) grew eight per cent in 2012 from 2011 and those in the city up by 3.1%.

However, this does not apply across the board.

Shoebox units in suburban areas are less popular and their prices dipped 6.3% last year.

With the latest property cooling measures, experts said the tables may now turn in favour of shoebox units that are further away from the city.

Their lower prices have now become an attraction to home buyers.

Alice Tan, senior manager at Knight Frank Consultancy and Research, said: “The recent cooling measures would impact on price quantum per se because home buyers would be working out their sums in terms of how much cash outlay they can put forth. Given the higher price sensitivity, shoebox could still be in demand, especially those in the prime areas and city fringe areas.”

With property developers now focusing on building larger homes, experts said a supply shortage for shoebox units is beckoning.

From November last year, the government restricted the number of shoebox units that can be built in a development in the suburbs, where the number of completed shoebox units is expected to quadruple to some 11,000 by the end of 2015.

With supply now curbed, prices should also stabilise.

Colin Tan, research head at Suntec-Chesterton, said: “The White Paper (on Population) may have boosted investors’ confidence because people are now asking is there now oversupply or not? This may also have boosted the popularity of shoebox units. Most of the shoebox units in the suburbs have been quite close to MRT stations.”

Mr Tan said there will still be rental demand for shoebox units in these areas but the rental prices may not meet the owner’s expectations.

Analysts expect prices of shoebox units to soften by one to two per cent this year.

But for the time being, prices may remain flat for at least the next six months as buyers stay on the sidelines to ascertain the effects of the cooling measures and the general direction of the world economy.

Source: Channel News Asia

Shoeboxes: Challenging times ahead..?

Sales of small private apartments, commonly known as shoebox units in Singapore, have taken a downward turn. Data compiled by analysts show that new sales fell about 57% in September from the previous month to 99 units.

The fall in the sale of shoebox units occured after the government announced that it will moderate the number of shoebox apartments entering the market.

Analysts said buyers are now taking a “wait-and-see” approach in response to the measures. This caused new sales of shoebox units to drop across the board last month.

Vicinities under the “Outside Central Region” category were hit the hardest, with sales falling some 80% to only 24 units sold in September. This is also the region where the new government regulations apply.

On September 4, the Urban Redevelopment Authority (URA) issued new guidelines that capped the total number of units that can be built on a site for non-landed private residential developments outside the Central Area. The new rules are to curb developers’ enthusiasm to build shoebox units in ‘suburban neighbourhoods’ which are largely designated for families.

But analysts said the impact on buyers’ appetites are only temporary. They said shoebox unit buyers are largely investors, and they may bounce back more quickly after each round of cooling measures introduced by the authorities.

Alan Cheong, director of research and consultancy at Savills, said: “Although we have one or two stories where people have decided to put off their purchases, we believe the market will revert to some sense of normalcy in a shorter period of time than it had been for the past five rounds of cooling measures.

“People have now got used to measures being thrown into the market, every year probably two or so.”

Analysts added that recent launches in the last three months like Sky Green, Parc Centros and Skies Miltonia, still reflect “brisk” demand.

Sky Green, located in McPherson, sold all 68 studio units within a single day during its pre-launch last week. Parc Centros in Punggol and Skies Miltonia in Yishun, have sold out 88% and 75% of their units respectively.

They added that this trend is unlikely to change as long as investors hold enough cash to splash around.

Mohamed Ismail, CEO of PropNex, said: “They sell mainly because of two reasons. One being the fact that the quantum of such properties are relatively low, coupled with today’s liquidity and low interest rate.”

Moving forward however, analysts said the appeal of holding a shoebox unit as an investment is likely to wane.

Eugene Lim, key executive officer of the ERA Realty Network, said: “I think buyers are becoming more aware that there is actually a huge supply that is going to be completed in 2014, 2015. And that would mean this would put pressure on rental. It is this type of investments that is actually losing flavour.”

About 11,000 shoebox units are expected to hit the market by 2015.

Source: Channel News Asia

Cap on shoeboxes… about time?

Looks like it is not just the Government that’s less than “enthusiastic” about all them shoeboxes…


References:
1. “Govt acts to contain rash of shoebox units “- The Business Times, 6th Sep 2012
2. “Shoebox relief” – The Business Times, 6th Sep 2012

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High-density living = urban lifestyle in shoebox?

Below is a letter published in today’s Sunday Times:

Last Sunday’s commentaries by writer John Lui (“Shoebox flats = Inhuman? Where’s the logic?”) and editor Warren Fernandez (“Can we cope with 8 million on the island?”) touched on issues which are related: the size of our living space and the social implications of a growing population.

Does high-density living mean an urban lifestyle in shoebox apartments?

In 1965, when I was five, my father earned $80 a month as an electrician, and my mother was a seamstress.

We lived in a rented Housing Board “no-room flat” which offered a living area, a kitchen and a bathroom.

Our kitchen had a foldable table and chairs, while our living area had a bed and a small wardrobe with a mirror on one of its doors.

Whenever my mother needed to cook in the kitchen, we had to fold away the table, and I would do my homework on her Singer sewing machine.

A stack of carton boxes in one corner of our flat functioned as our mobile storage space.

At night, I would sleep with my mother, and my father would usually sleep on the floor, next to all the unsewn clothes.

I seldom had toys, not because we could not afford them, but because there was no space to store them.

As I grew older, my parents decided that such a small living space was not ideal for any child to grow up in. So we moved.

Today, shoebox apartments are being built and promoted by developers, who say they see the need and demand for a modern urban lifestyle. Actually, the motivation is purely profit-driven. Shoebox units point the way to higher revenues for developers who want to maximize their margins.

Back in 1960s, we had a choice to upgrade our then-urban lifestyle by not renting such a small flat.

But today, many people choose to live in tiny shoebox flats.

When someone decides to buy a shoebox apartment, he will need to take a loan that will tie him down for the next 15 to 20 years.

Try getting out of this lifestyle when it’s time to have children.

Ben Liew

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Ben’s letter brought back some old memories. I too spent the early years of my life living in a “no-room flat” in Lengkok Bahru. It housed 5 adults (my parents, my grandparents and my uncle) and a kid (me), so you can imagine that it was quite a squeeze back then. My parents and I spent the nights sleeping on the floor as the flat could only accommodate one bed, which was occupied by my grandparents. Thus it was a huge relief when we finally got the keys to our brand new 3-room HDB flat in Stirling Road!
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The Real Deals (24-05-2012)

Even Maybank Kim Eng Reasearch has gotten into the “shoebox” action with their latest issue of The Real Deals.

Click on the link to read the report:
http://www.scribd.com/doc/95042500/The-Real-Deals-24-05-2012#fullscreen

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Shoeboxes: In the spirit of balanced posting…

While the writer has raised some interesting and valid points, it’s rather sad to think that the notion of a home these days are nothing more than a place to go back to sleep to… much like a hotel.

Maybe one reason why many Hong Kongers are rarely at home is because of the fact that most of their apartments are so lacking in space that they have little choice but to go out…?


Reference: “Shoebox flats = Inhuman? Where’s the logic?” – The Sunday Times, 27th May 2012

 

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Here’s what the CEO of CapitaLand thinks about shoebox homes…

The wife and I have been accused of being (quote) “a frog in a well to say that any space below 600sqft is unlivable or not conducive for family living” (unquote).

We still find the “accusation” somewhat puzzling (absurd is probably the better word but we try to be nice). While the wife and I have openly acknowledged that we are no fan of shoeboxes, the whole livability/condusiveness debate actually stamped from a letter sent to the ST Forum page, which we had picked up and posted on our blog for discussion purposes. If only Mr/Ms Anonymous 21/5/2012, 1:02AM had bothered to REALLY READ our blog, he/she may not be so quick to credit us with bigotry.

And now that we have the head honcho of one of the largest public-listed property developer (i.e. he should know what he’s talking about, especially to the media) making similar comments about shoebox units, we wonder if he will also be deemed as another (paraphrasing) “frog in a well”….

Going back to the facts of the matter, the wife and I feel that in addition to possibly setting a minimum size for apartments, the government should probably legislate on what developers can include as part of the overall size of the apartment. Can one really “live” in spaces dedicated to planter boxes and aircon ledges, which can take up a fair amount of real-estate especially in smaller apartments and which one currently have to pay the same $psf for?

For those who bother to see the whole picture rather than jumping to conclusion:
http://sgproptalk.blogspot.com/2012/04/heres-what-some-say-about-shoeboxes.html
http://sgproptalk.blogspot.com/2012/04/shoebox-unit-is-livable.html

Reference: “Shoebox units inhuman: CapitaLand CEO” – The Business Times, 26th May 2012

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Here’s one about English "shoeboxes"…

88sqm (947sqft), three-bedroom houses in England are considered shoeboxes? We should probably rename our local version “matchboxes”…

For those who are interested, click on below to access the RIBA report:
http://www.scribd.com/doc/93867658/Case-for-Space#fullscreen

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