Tag Archives: shoebox apartment

Shoebox influx in 2017

Investors of shoebox units may face some difficulty renting them out, reported The Straits Times.

This is because a bumper supply of shoebox units are expected to enter the market, peaking by around 2017, revealed R’ST Research data. Leasing demand for such units is also untested, with fewer foreigners able to afford them.

“Increasingly, many (overseas nationals) can’t even afford renting a single shoebox unit, but would instead rent a room in an apartment… Rents will be under further pressure,” noted Alan Cheong, research head at Savills Singapore.

Based on caveats lodged, majority of the supply will come from District 19Sengkang, Hougang and Punggol – with at least 700 units expected to be completed during this period.

R’ST Research noted that at least 527 shoebox units could come from District 14, and at least 383 units from District 12. Over in the suburbs, districts 17 and 22 will contribute at least 224 units and 151 units respectively.

In the Guillemard to Changi Road area (Districts 14 and 15), Cheong stated that prices of newly-completed shoebox units stood at around $1,350 psf in 2013, increasing to more than $1,400 psf late last year and this year.

However, rents for such units fell from $2,600 per month in 2013 to around $2,000 to $2,200, bringing the gross yield down from 5.2 percent in 2013 to 4.1 percent.

Most shoebox owners have holding power, opting to keep their units rather than sell them at a low price. Hence, yields have more room to fall into the mid-three percent level in more accessible areas such as District 14, where rents stood at less than $2,500 per month.

“Once we venture into the new developments in the outlying HDB estates, the market is untested. There, yields may tend closer to three percent or even dip below that,” said Cheong.

Overall, prices of shoebox units fell by about 10 percent from their last peak in August 2013, based on flash estimates of the NUS Singapore Residential Price Index. Prices dropped about 1.1 percent in June from the month before.

R’ST Research director Ong Kah Seng said while prices of shoebox units keep falling due to growing supply, such units are still relevant.

“These tend to be occupied by younger tenants or owners, who will bring energy to the development and area – especially important for newer residential areas like Bartley, or those undergoing rejuvenation like Hillview and Lakeside.”

Challenging times ahead for shoebox landlords

Landlords of shoebox apartments located outside the city centre will find it “challenging” to rent out their units once the influx of new homes enters the market next year, said experts quoted in the media.

Most of the 53,900 new condo units set to hit the market over the next 30 months are small or shoebox apartments, or units measuring up to 506 sq ft.

“Owners of such units for investment would not be as successful at getting the kind of rentals they want going forward,” said Desmond Sim, Research Head at CBRE.

“There will be pressure on vacancies, as they will be facing competition from the broader market too.”

While there are no official figures on the number of shoebox units in the market, in September 2012 the Urban Redevelopment Authority (URA) estimated that there were around 2,400 completed units as at 2011, with the number climbing to 11,000 by the end of next year.

From 2009 to 2012, shoebox units featured heavily at newly launched projects including the 72-unit Suites@Guillemard in Lim Ah Woo Road, the 138-home Parc Imperial in Pasir Panjang Road and the 293-unit Alexis in Alexandra Road.

Although they tend to have a higher psf price due to their small size, investors find the overall quantum “more palatable, especially amid tightened financing”, noted Chia Siew Chuin, Director of Research and Advisory at Colliers International.

Typically, rental yields of shoebox units range from three to four percent, up from the two to three percent yields for residential developments islandwide.

However, experts warn investors looking to acquire shoebox apartments that rents for such units are expected to moderate in line with the flood of newly completed homes.