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Rental yield for shoebox units in suburbs reasonably high

Posted on 3 Dec 2014 | Comments Off

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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Posted in Rental / Lease

Tagged private homes, rental yield, Shoebox Units

Potential sellers unlikely to lower price expectations

Posted on 3 Oct 2014 | Comments Off

Prices of private homes in Singapore continue to cool but at a slower pace as shown by Urban Redevelopment Authority (URA)’s flash estimate for Q3 2014.

According to Colliers International’s Director of Research and Advisory Chia Siew Chuin, many sellers are not in any urgent need to dispose their properties as many have already gained from earlier property trades. Some may even be still sitting on paper profits if they made their investments in the earlier up-cycle.

“Many owners of private residential properties today have benefitted from the robust capital appreciation since 2005. Except for the short blip during the global financial crisis, which did not take long to recover, property owners/investors have generally enjoyed more than attractive profits in the last nine years or so,” she said.

As potential sellers expect there is still some time before interest rates increase, and due to their current financial muscle, they are unlikely to lower their price expectations. At the same time, these sellers are likely to time their exit in order to minimise or to avoid paying Seller’s Stamp Duties (SSD).

Additionally, developers have enjoyed the gains in the residential property price run-up from 2005. Chia said, “With the amount of profits made during the boom years, some of them have the financial power to maintain current prices or else offer moderate discounts. Potential buyers are well aware of the current downtrend in prices and they refrain from making purchases now, in expectation of even lower prices in the near term.”

These factors explain this price stalemate in the current market, she said, as reflected in URA’s latest flash estimates.