Rental yield for shoebox units in suburbs reasonably high

The rental yield of shoebox units in the suburbs are comparable to those in the city, said property analysts and reported in the media.

However, they caution that landlords may not get the kind of rental income they expect in the near future, considering that the Urban Redevelopment Authority (URA) predicts around 11,000 shoebox units by end-2015.

Measuring less than 500 sq ft in size, shoebox units are typically one-bedroom units with a bathroom.

Alan Cheong, Head of Research at Savills Singapore, said the rental yield of shoebox units in the suburbs are about three percent compared to the two to three percent yield of other types of private homes.

He noted shoebox units are particularly popular among single expatriates because their companies either hired them on local employment terms or have slashed their housing budget.

Shoebox units priced within $2,000 to $3,000 are at an advantage, said Cheong.

Chris Koh, Director of Chris International, noted while the appeal of such units continues to be strong among investors, he warns that tenants have other choices. “With a budget of $2,500 to $3,000, there are some outskirt condominiums with two and three bedrooms that they can rent. So, they do make comparison with these shoebox units because these units are rather small.”

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