Hard landing for shoebox investors…?

The number of small apartments, or shoebox units, in Singapore will nearly quadruple from 2,500 currently to 9,700 by 2015, the government said.

Currently, about 8 out of 10 shoebox apartments are located in the city, appealing to singles and expats with lower transportation costs and travelling time to their workplace.

But analysts question the appeal of shoebox units in the heartlands, where HDB flats are in abundance, providing more space for less rental.

Cheaper mortgage rates and plenty of liquidity were pushing investors to property, but speculation may be waning.

Since December’s cooling measures, transactions of uncompleted units in the resale market dropped to four per cent, while the number of private residential properties bought by foreigners and companies dropped to seven per cent.

Land supply for residential needs has also increased.

“The market is a lot cooler than it was, say, one year ago,” Minister for National Development Khaw Boon Wan said.

“(But) there are pockets of hot activities, particularly in the mass market, with the emergence of these shoebox units.”

Shoebox units made up 27% of new home sales in the first quarter.

But unlike the soft landing of most property segments, analysts warn rentals and resale values of shoebox apartments could drop drastically.

“Shoebox (units) would be the first to suffer,” research head of Chesterton Suntec Colin Tan said.

“We may get (a situation) in the future where there will be falling prices for small apartments, and then rising prices for normal-sized apartments because they simply do not meet the requirements of the family.”

Source: Channel News Asia

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Minister Khaw on shoeboxes: Second Warning this month?

Minister for National Development Khaw Boon Wan on Monday said he would not hesitate to intervene should there be clear evidence of unsustainable investor demand for shoe-box apartments.

He added that the Ministry of National Development (MND) was watching the situation closely.

However, Mr Khaw cautioned that it would be hard for him to intervene at present as the market for shoe-box units in the heartlands was “untested”, and he did not want to think he knew “better than developers or investors”.

Mr Khaw was responding to a question in Parliament by MP for Jurong GRC Ang Wei Neng, who asked if MND keeps track of the profiles of buyers of shoebox apartments.

Mr Ang also asked MND to share how many buyers of shoebox apartments were HDB occupants, and if these buyers were staying in HDB flats larger than 50 square metres.

In response, Mr Khaw said that MND did not yet have a good breakdown on the type of people that have invested in shoe-box units.

“But eyeballing some of the data we have, it suggests they are mostly Singaporeans with HDB addresses,” Mr Khaw added. “They obviously don’t plan to stay there (in shoe-box units), because they won’t be able to fit into 50 square meters with a family of several (people).”

Mr Khaw said these buyers were likely to be investors who were parking their funds in shoe-box units, with the expectation of renting them out.

“They must have seen shoebox units in the central region being able to be tenanted out easily with reasonable yield,” he added. “The difference this time round is that most of the units are in the heartlands — where the market is untested.”

He likened the situation to a ferry, which may be overloaded under certain conditions.

“It’s like a ferry designed for a certain capacity,” Mr Khaw said. “If a ferry is overloaded with too many passengers, especially if they’re sailing in shallow waters, it may sink.

“But because it’s an untested water and untested market, it is hard for me to intervene in the market, thinking I may know better than developers or investors.”

“I think the minimum I can do is to alert everybody that I can see long queues going to board the ferry, and I think my job is to share that information as much as I can with the investing public, as well as the developers,” Mr Khaw added.

Currently, there are about 2,500 units of completed shoe-box units, making up 1.2 per cent of the 210,000 non-landed units in private housing stock. The supply of shoe-box units is expected to increase to 9,700 units by 2015.

Source: Channel News Asia

Then again, IF most buyers of shoebox units are anything like the folks who have commented (about the subject) on our blog over the past week, there is absolutely nothing that Minister Khaw needs to worry about *fingers crossed*.

Ok, we better stop rumbling before we get accused of dissing shoeboxes (again)…  🙂

You may also be interested in the post below:
http://sgproptalk.blogspot.com/2012/05/garments-first-warning-shot-at.html

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Shoebox unit is livable!

Some of you may recall Mr Yap Boh Tiong’s letter in last week’s Sunday Times (If not, click on this link: http://www.sgproptalk.blogspot.com/2012/04/heres-what-some-say-about-shoeboxes.html).

The wife and I were expecting a response from the “pro-shoebox” camp and surely enough, there is a rebuttal letter in today’s Sunday Times.


Reference: “Cosy shoebox flats foster togetherness”- The Sunday Times, 15th April 2012

While we concede that nobody should judge or dictate someone else’s dwelling for child-bearing purposes, we feel that Ms Lo has missed the point somewhat –  by “livability” Mr Yap was actually referring to population growth and family (which generally refers to a fundamental social group in society typically consisting of one or two parents and their children) bonding. 

The counter-argument will be more compelling (in our humble opinion as always) if it comes from a family of 4 people (parents + 2 kids) living in a 463sqft apartment. Then again, we do know of some married couples who call their pets “kids” (and probably treat them better too)…

But for the rest of us who are sitting on the fence with regard to the “livability” debate, below is another opinion piece on why shoebox apartments may not be the “affordable alternative” that many buyers think they are.

Have a great week ahead!

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"Shoeboxes" bad for marriage and child birth….?

There has been quite a bit of buzz around shoebox units in our local newspapers over the Easter weekend.

Both writers question the social implications of living in such “shoeboxes”, especially when comes to promoting marriage and more importantly, having children.


References:
1. Limit number of shoebox units in private develoipment – The Straits Times, 7th Apr 2012
2. Bigger families? Not in shoebox flats – The Business Times, 7th Apr 2012

The wife and I are (you can probably tell by now) no fan of shoeboxes. But we reckon it will take much more than a bigger apartment to entice our younger generation to marry earlier and have more kids.

My wife’s maternal grandparents have like 8 kids and everyone was living under the same roof of a less-than-1,000sqft, 3-bedrrom SIT flat in Tiong Bahru until all of them eventually got married and moved out.

While one can argue that THAT was a time when “policemen still wore shorts”, what we really need is a fundamental change in mindset of our younger generations regarding marriage/having kids and better support structure for parents, which is more than what the current “Baby Bonus” or calls to regulate the size of  apartments can address.

Our humble opinion, as usual… Have a great week ahead!

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Shoeboxes getting "shooed"…?

Demand for small sized apartments also known as shoebox units may be waning.

These units spanning less than 500sqft seem to be a hit with property buyers recently.

Analysts said the popularity of these units in the rental market will only be tested in 2013, when the bulk of these units will be ready and put up for rent.

Smaller apartments have been flooding the property market in recent years.

A shoebox unit is roughly the size of four HDB carpark spaces, and its price can go for below a million dollars for a private property.

Analysts noted that some a record high 2,000 units of this size were snapped up last year.

But experts said demand may be waning on concerns of potential oversupply.

Savills’ Head of Research, Alan Cheong, said: “At the moment, that seems to be the typical blueprint of developer to have shoebox units in any development. But I would think that the time will come, perhaps as soon as the second half of the year, when developers realise that they may have to tweak it to a family-oriented size units because you are also heading towards 2013, when the supply of the 2,000 units is coming out.”

Market watchers will be placing their attention on the upcoming Alexis, slated to complete by 2012.

Touted as one of the first few shoebox developments to be ready, Alexis will set a benchmark in how much rental shoebox apartments can fetch.

Lee Sze Teck, who is senior manager (Research & Consultancy) at DWG, said: “I think this would be popular with expatriates that don’t come with an expatriate housing package. For locals, maybe singles would prefer if it suits their current lifestyle, as in they work late, don’t stay there much often, and just going back there to rest.”

Analysts estimate shoebox units to command rentals between $2,500 and $3,000 in the suburbs.

IPA CEO Ku Swee Yong said: “For a $3,000 budget per month, you scarcely can get a shoebox unit near to town or within CBD itself. But for $3,000 going out to the North-east of Singapore, Choa Chu Kang or Bukit Panjang, that rental can get you a 5-room HDB apartment that is three times the size of your shoebox unit. And you would probably still be able to share two of your bedrooms with some of your colleagues in order to share your rental expenses further. So in the outskirts of Singapore, small sized units rental values may not be as high as what we imagine or project them to be today.”

Another sign of waning popularity is that prices of shoebox units in the resale market also dipped by 0.9% in February.

This is according to Singapore Residential Price Index compiled by NUS Institute of Real Estate Studies.

Source: Channel News Asia

Let’s just hope that both locals and foreigners alike will continue to embrace the “small format” living concept, especially with all these shoebox units coming onstream next year. 

As for the wife and I, we will prefer to stay put in our little 1,600+sqft 3-bedder, despite the fact that it’s leasehold and over 30 years old…thank you.

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Shoebox prices peaking…?

The price of shoebox units are on the rise but concerns over affordability in this segment could see prices softening.

The Singapore Residential Price Index (SRPI) by the National University of Singapore (NUS), which tracks the price movement of new small apartments, rose 3.1% in August (month-on-month), after falling 0.5% in July.

The increase is more significant when compared to the overall SRPI which remained flat in August and July.

Small units are defined as being no bigger than 506sqft. The SRPI Small for small units was created in July. At the time, NUS’ Institute of Real Estate Studies said that “this is important market information which will help us understand the price behaviour of different segments of the market.”

The popularity of shoebox units is a relatively new trend that appears to be correlated with housing affordability.

Jones Lang LaSalle’s head of research and consultancy Chua Yang Liang said that the increase in the SRPI Small was underpinned by the housing needs of young and small families. “Affordability is an issue,” said Dr Chua.

Investors are also price sensitive, it seems. “You also can’t discount the fact that some are buying for investment,” Dr Chua added.

Because this segment of the market is tied to the quantum price of the property, prices are not likely to keep rising, because the units cannot feasibly get any smaller.

“There will be a point when prices cannot get higher,” Dr Chua added.

Looking at the segmental index, the SRPI Central (central region), excluding small units, fell 0.7% while the SRPI Non-Central, excluding small units, rose 0.5%.

Giving insight on the overall property market, Nicholas Mak, head of SLP International Research, said: “The price range is reaching a plateau with no increase. The growth from sub-sectors like non-central and smaller units implied a stronger demand while the central district, suffering from three months of contraction, showed the opposite.”

Mr Mak also added that due to the current economic slump, the market becomes very “uncertain” and there is a need for investors to be “selective”.

Source: Channel News Asia

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Living in a box, living in a (Shoe)box…

Shoebox units outperformed other condos as an investment last month, according to website iProperty.com.

Prices for the minute flats, normally measuring less than 500sqft, rose 14% to an average $1,549psf in August 2011 from a year ago.

In contrast, psf prices increased 4.9% for condominiums measuring between 501 to 1,500sqft; and rose 9.9% for condos of more than 1,500sqft.

The hotspot for shoebox units was District 15 with 513 apartments transacted, while the lowest was in the non-prime area District 21 with only 11 of the total 197 deals crossed in August.

Shaun Di Gregorio, iProperty Group CEO, said the shoebox “present attractive investment opportunities,” despite the steep pricing and market uncertainties posed by European and US debt crises.

Some analysts such as Mr Ku Swee Yong, the CEO of International Property Advisor Pte Ltd, speculate the rise demand for shoebox apartments in August may be due to the spike in such properties being developed during that period.

“We cannot assume that the strong take up of shoebox units is due to the popularity of investors because it is a relatively new market,” said Mr Ku.

Source: Channel News Asia

Whether you are a convert or skeptic on the issue of rising popularity of shoeboxes, there are always two sides to a coin (unless you are Harvey “Two-Face” Dent, of course). Below is an article in The Straits Times today whereby the writer seems perfectly happy living in her shoebox unit and professes that “the popularity of small apartment living is an index of a city’s sophistication.”

So, what do YOU think?

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It’s all about the shoeboxes…

Over the past 2 years, shoebox units have been increasing in popularity. They usually achieved the highest psf prices compared to bigger units within any project and are also becoming more expensive.

Here are solid numbers to substantiate those claims:

Despite the continual popularity of such smallish units, here’s a caveat by Credo Real Estate executive director Ong Teck Hui: “A lot of people are buying shoebox units because they are a more bite-sized investment. However, whether these apartments can fetch the yields some of these buyers expect remains to be seen, especially in suburban locations.”

Source: The Business Times

Have a great weekend, everyone!

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Shoebox apartments: Good for developers & retailers?

The following article appeared in last Friday’s edition of the TODAY paper:

‘Shoebox’ trend a boon for developers and retailers
By: Tan Chin Keong

One quirk of the current recovery in Singapore’s residential property market is the rising popularity of small-sized apartments, better known as “shoebox” units.

Since early 2009, when the current home market up-cycle began, private property developers have sold a number of projects consisting mainly of “shoebox” units. These include The Alexis, which kicked off the “shoebox” trend and Suites@Guillemard, which probably holds the smallest apartment at 258sqft.

In fact, the percentage of non-landed private residential units with floor space of less than 650sqft (our definition of a “shoebox” unit) sold by private property developers has risen from 12% in 2009 to 38% year-to-date in 2011.

We also notice a downsizing trend in public housing over the last few years. Based on data from the annual reports of the Housing and Development Board, the percentage of smaller flats (four-room and below) sold by the board went up from 46% in the fiscal year ending March 2005 to 67% in the year ending March 2008. This ratio further rose to 83% in the year ending March 2010.

However, this trend is also driven by the rising popularity of four-room flats versus five-room and executive flats. But it has to be noted that with floor space of around 970sqft, four-room flats are not really that small.

So it can be seen that the downsizing trend is more pronounced in the private property market. While shoebox units help keep private homes within the reach of many by keeping the total purchase quantum affordable, it has also allowed developers to raise their projects’ prices on a per-square-foot basis and is likely one of the drivers of the currently high prices.

One unintended consequence of this trend may be to increase the propensity of “shoebox” unit residents to shop and raise their retail spending. This is because many of the units come with small or no kitchens and there may be no room for a proper dining area. Thus, residents are likely to dine out more often and engage in more post-meal shopping.

In addition, residents of these units may feel a greater urge to go outdoors to avoid being cooped up in their homes for extended periods. Indeed, this is one of the reasons often given by my Hong Kong friends when I ask them about their love for shopping.

Due to their generally smaller homes, Hong Kong residents feel the need to stay outdoors and engage in shopping more frequently. This could be one of the drivers behind Hong Kong’s higher retail sales of around US$5,900 (S$7,180) per capita last year versus Singapore’s US$4,900. However, with the burgeoning shoebox trend, it may not be very long before Singaporeans catch up with their Hong Kong counterparts when it comes to shopping.

So, in addition to the private property developers, retailers could end up as beneficiaries of this trend. However, before some of our female (and also male) readers try to use this to justify shopping for more shoes, do keep in mind that your “shoebox” unit may not have any space for bigger shoe racks.

Tan Chin Keong is an analyst at UBS Wealth Management Research.

The wife and I always believe in the notion that “a man’s (woman’s) home is his (her) castle” – a place where we will always enjoy returning to after a long day at work. So it is rather sad to think that one has to “escape” to the streets/malls in order to avoid feeling claustrophobic in his/her tiny apartment…

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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.