Govt raises red flag, as supply of such units expected to rise fourfold over the next three years
Slowly but surely, shoebox units are making their way into the heartlands – and National Development Minister Khaw Boon Wan has raised a red flag over the phenomenon.
Buoyed by strong rental demand, such units – which are smaller than 50 sq m – are increasingly popular with investors. Going forward, the question is whether that demand can be sustained, especially in the suburbs, he noted in Parliament yesterday.
According to Mr Khaw, there are 2,500 such apartments in the market, with about 80 per cent of them in the central region. Within the next three years, the number is expected to surge fourfold to 9,700.
“Unlike the existing shoebox developments, many of the new shoebox units will be located in the heartlands,” said Mr Khaw, who had previously expressed concerns over the growing popularity of these apartments.
Responding to questions from Jurong Group Representation Constituency Member of Parliament Ang Wei Neng – including whether the Government would consider tightening regulations for such units – Mr Khaw zeroed in on the proliferation of shoebox units in the heartlands, where the market is “untested”.
Mr Khaw added: “But because it’s an … untested market, it is hard for me to intervene, thinking I may know better than developers or investors.”
Mr Khaw reiterated the Government is watching the situation closely and he will not hesitate to intervene if there is clear evidence that investor demand for such units is unsustainable.
While the Ministry of National Development does not have a breakdown of the profiles of buyers of such units, Mr Khaw said: “Eyeballing some of the data we have suggests they are mostly Singaporeans with a HDB address – so they obviously don’t plan to stay there because they don’t be able to fit into this 50 sq m for a family of several.”
He added: “They must have seen shoebox units in the central region being able to be tenanted out easily with reasonable yield.”
Recently, projects that feature shoebox units have been launched in areas like Punggol, Woodlands and Bukit Batok.
Currently, shoebox units comprise about 1 per cent of the total private housing stock.
Noting the aggressive marketing of shoebox units since the middle of last year, SLP International research head Nicholas Mak said factors such as a slow-moving prime market, as well as the large number of suburban land parcels snapped up by developers, have encouraged developers to build more shoebox units in the heartlands.
Mr Mak noted that, despite the Government’s cooling measures, Singaporeans are still looking for ways to invest in property – given the low interest rates. With the typical budget of these property hunters at “less than S$1 million”, developers are trying to price their projects accordingly. “But in order to increase profitability, (developers) just build the units smaller”, he noted.
Mr Mak cautioned about a risk of oversupply – fuelled partly by investors’ mistaken belief that these units can continue to yield attractive rentals,
Jones Lang LaSalle head of research Chua Yang Liang, however, believes that there will be sufficient demand for shoebox units, with expatriates who are hired on local terms – particularly in the services sector – looking at the suburbs “as an alternative location”.
Anecdotally, Dr Chua has observed the trend of both the younger generation and the elderly choosing to stay on their own instead of with their families – which he said could fuel the buying of such units in the suburbs for owner-occupation.
For now, most buyers of shoebox units are investors, said Chesterton Suntec International head of research and consultancy Colin Tan.
But over time, the proliferation of such units, especially in the heartlands, could entail a social cost.
“The overabundance of shoebox units … might lower rents enough to persuade singles to venture out on their own, where people are encouraged to leave homes early,” he said.
Source: Today – May 15, 2012