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Singapore to Closely Monitor Shoebox Units Market

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by Ernie B. Calucag

The Singapore government on Monday said that it is closely monitoring the transactions within the shoebox apartments market as these tiny homes are slowly becoming a hot property in Singapore.

“The market is a lot cooler than it was say one year ago, although there are little pockets of hot activities particularly in the mass market with the emergence of shoebox units,” Minister for National Development Khaw Boon Wan told Parliament on Monday.

He noted that private home prices registered a marginal decline in 1Q2012 for the first time. This followed nine consecutive quarters of moderating price increases.

Another indicator, the proportion of sub-sales in the market – a proxy for the level of property speculation – has fallen sharply to about 4 per cent.

Mr Khaw said that although private housing prices have started to stabilise in the Central Region, they are still rising for mass market properties outside the Central Region.

In particular, he cited the concern on the increasing number of shoebox units being sold by developers in the suburbs even though their appeal to tenants remains untested.

Shoebox flats, measuring 500 square feet or smaller, now account for more than a quarter of private home sales, a big jump from about 15 per cent late last year. Latest figures from the Urban Redevelopment Authority show that 1,764 shoebox units were sold in the first quarter this year, representing about 27 per cent of the 6,526 private home sales.

As recently as the fourth quarter of 2011, shoebox flats accounted for slightly over 15 per cent of the total new sales.

“We will continue to be very vigilant, closely monitoring the situation. Clearly, the market is (heading) towards a soft landing but we have not landed yet. So stay seated with your buckle on,” he added.

Currently, there are about 2,500 units of completed shoebox units, making up 1.2 per cent of the 210,000 non-landed units in private housing stock. The supply of shoebox units is expected to increase to 9,700 units by 2015.

In a report early this month, property consultancy firm CBRE said that the proliferation of shoebox apartments has made the value of new non-landed homes in Singapore cheaper.

It said that the total value of new non-landed homes decreased 22 per cent in 2011 to S$16.568 billion from S$21.173 billion in 2010. This is based on the 13,611 caveats lodged for new non-landed homes last year against the 13,933 caveats lodged in 2010.

“The drop in the total value of transactions has been driven by the robust sale of small format apartments across the island. As recent as 2008, shoebox units were mostly found in city-fringe locations. Today, such units are also found in suburban condominium projects built on sites acquired from the government land sites,” said CBRE.