Analysts have said buyers of shoe-box apartments may have difficulties selling them in future, even though their current rental returns of about 5% make such apartments popular with small-time investors.
Although they are small in size, they are priced at about $600,000.
Analysts added that at this price, buyers are still able to afford them.
In one of his recent blog posts, National Development Minister Khaw Boon Wan urged buyers to consider the risks and returns when buying shoe-box apartments.
Analysts said more shoe-box apartments will be built by 2013, possibly leading to a glut.
They said the main attraction of such apartments is their prime location, including proximity to town areas and MRT stations.
If these apartments sprout in less-than-ideal locations, it may be harder for investors to sell them off later.
Analysts Channel NewsAsia spoke to pointed out if the per-square-foot (psf) value of the apartment is already high, investors might find it harder to sell it off at a good profit.
But some buyers - such as retiree Linda Teo - are still optimistic about the profits they can reap.
Madam Teo and her husband bought a shoe-box apartment near the Farrer Park MRT station about two-and-a-half years ago.
At about 581sqft, her apartment is smaller than a three-room flat.
She said despite having only just received keys to her unit, she already has people offering to buy it from her at 20% more than her purchase price.
But Madam Teo said she intends to keep it as an investment.
"I think if I keep the money in the bank, the interest is quite low, I'd rather put it in a property for my children, for their future," she said.
"Currently, the rental for this project is about $3,000 to $3,500 per month. There have already been a lot of interested tenants who have come to view the place. I think it shouldn't be a problem.
"My view is, at this moment, we do have a lot of buyers who have approached us, who want to buy this project.
"Even two to three years down the road, if the demand is not there, we'll decide to keep this for the children, so I don't see this as a problem."
Source: Channel News Asia