Smaller homes will continue to be a ideal option for developers and homebuyers, according to a CBRE report.
A study of caveats lodged for non-landed new sales from 2007 to H1 2014 shows 50 to 70 percent of new units sold were priced below $1.25 million.
Largely due to their constrained finances, the most buyers in the new sale market currently continue to adhere to the threshold of $1.25 million.
CBRE said, “Looking at the addresses of buyers of new sale units with price tags below $1.25 million, it was observed that since 2008 about 50 to 70 percent of them were HDB occupiers. These buyers could be HDB upgraders or singles and new couples looking for their first homes. However, should housing cost rises above $1.25 million, they would be priced out of the market.”
To cater to them and still remain profitable, developers reduced the size of units for sale.
“The median size of new sale units has shrunk from 1,270 sg ft in 2007 to 743 sq ft in H1 2014, reflecting a 41.5 percent decrease,” the report said.
Thus, both developers and buyers have shown adaptability to changing market conditions: “Developers adapt by producing homes of smaller formats; while buyers adapt by making a trade-off between size and total quantum. Going forward, unless there is a shift in land prices and constructions costs, smaller homes will continue to be a preferred choice for both developers and homebuyers.”