Shoeboxes: Challenging times ahead..?

Sales of small private apartments, commonly known as shoebox units in Singapore, have taken a downward turn. Data compiled by analysts show that new sales fell about 57% in September from the previous month to 99 units.

The fall in the sale of shoebox units occured after the government announced that it will moderate the number of shoebox apartments entering the market.

Analysts said buyers are now taking a "wait-and-see" approach in response to the measures. This caused new sales of shoebox units to drop across the board last month.

Vicinities under the "Outside Central Region" category were hit the hardest, with sales falling some 80% to only 24 units sold in September. This is also the region where the new government regulations apply.

On September 4, the Urban Redevelopment Authority (URA) issued new guidelines that capped the total number of units that can be built on a site for non-landed private residential developments outside the Central Area. The new rules are to curb developers' enthusiasm to build shoebox units in 'suburban neighbourhoods' which are largely designated for families.

But analysts said the impact on buyers' appetites are only temporary. They said shoebox unit buyers are largely investors, and they may bounce back more quickly after each round of cooling measures introduced by the authorities.

Alan Cheong, director of research and consultancy at Savills, said: "Although we have one or two stories where people have decided to put off their purchases, we believe the market will revert to some sense of normalcy in a shorter period of time than it had been for the past five rounds of cooling measures.

"People have now got used to measures being thrown into the market, every year probably two or so."

Analysts added that recent launches in the last three months like Sky Green, Parc Centros and Skies Miltonia, still reflect "brisk" demand.

Sky Green, located in McPherson, sold all 68 studio units within a single day during its pre-launch last week. Parc Centros in Punggol and Skies Miltonia in Yishun, have sold out 88% and 75% of their units respectively.

They added that this trend is unlikely to change as long as investors hold enough cash to splash around.

Mohamed Ismail, CEO of PropNex, said: "They sell mainly because of two reasons. One being the fact that the quantum of such properties are relatively low, coupled with today's liquidity and low interest rate."

Moving forward however, analysts said the appeal of holding a shoebox unit as an investment is likely to wane.

Eugene Lim, key executive officer of the ERA Realty Network, said: "I think buyers are becoming more aware that there is actually a huge supply that is going to be completed in 2014, 2015. And that would mean this would put pressure on rental. It is this type of investments that is actually losing flavour."

About 11,000 shoebox units are expected to hit the market by 2015.

Source: Channel News Asia