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25-06-2011, 05:14 AM
Business Times - 25 Jun 2011
Look at shoe-box units with caution: Khaw
Blog entry comes amid suggestions that the government should step in to impose a minimum size for private homes
By UMA SHANKARI
THE Ministry of National Development (MND) is 'closely watching' the development of small- sized, or 'shoe-box', apartments in Singapore.
Writing in his blog, National Development Minister Khaw Boon Wan yesterday urged potential buyers to weigh the benefits and risks of the so-called shoebox units carefully.
He also suggested that analysts can 'refine' their analysis by including separate analyses for each category of housing products.
'Comparing price per square foot (psf) for different products is like comparing apples with oranges,' Mr Khaw said.
His blog entry comes amid suggestions that the government should step in to impose a minimum size for private homes.
Shoe-box apartments are typically below 500 sq ft. The emergence of such units here is a fairly recent phenomenon although they are common in Hong Kong and Tokyo.
Mr Khaw said in his post that there appears to be demand for shoe-box apartments. The annual take-up of such units has tripled from 300 units in 2008 to 1,900 in 2010, or from 6 per cent to 12 per cent of developers' sales over the same period.
Some 80 per cent of the buyers are Singaporeans. They are presumably buying these units as an investment and hope to rent them out to expats or singles, Mr Khaw said.
He added that industry analysts and developers have told him that many shoe-box units will be completed soon. By 2014, the total number of completed units will increase from 1,100 to 3,800, based on known plans.
In addition, some developers, who have paid high prices for residential plots, are planning to build shoe-box units. This will add to the build-up.
The analysts and developers also noted that the newer shoe-box developments are in the suburbs, and their appeal to tenants remains untested.
Said Mr Khaw: 'Some analysts wonder aloud if buyers know what they are in for. Some have suggested that the government should step in to impose a minimum size.'
'My instinct is not to second- guess the market. Some shoe-box units do add to the diversity of housing options here. But we are closely watching its development.'
He added that, for now, potential buyers should weigh the benefits and risks carefully.
Mr Khaw also said that MND, on its part, requires developers to give an accurate representation of units, both within the show flats and in the sales materials. Analysts can also help to refine their analyses, he said.
Analysts welcomed Mr Khaw's remarks.
'The good thing about his statement is that this is the first time a government official has highlighted the economics of buying a show-box unit,' said International Property Advisor chief executive Ku Swee Yong.
But the analysts also noted that it is difficult to compile data on price trends and yields for shoe-box units as there is no historical data.
'For investors, paying a high psf price for a shoe-box unit could make sense if the unit can command a high psf rent. Right now, we suspect that they can't get those kinds of high rentals, but there is no way to be sure as most of these units are not on the market yet,' an analyst said.
Home buyers could also be pushed to look to smaller-sized units because of rising costs and home prices, said Joseph Tan, executive director for residential at CB Richard Ellis (CBRE).
Look at shoe-box units with caution: Khaw
Blog entry comes amid suggestions that the government should step in to impose a minimum size for private homes
By UMA SHANKARI
THE Ministry of National Development (MND) is 'closely watching' the development of small- sized, or 'shoe-box', apartments in Singapore.
Writing in his blog, National Development Minister Khaw Boon Wan yesterday urged potential buyers to weigh the benefits and risks of the so-called shoebox units carefully.
He also suggested that analysts can 'refine' their analysis by including separate analyses for each category of housing products.
'Comparing price per square foot (psf) for different products is like comparing apples with oranges,' Mr Khaw said.
His blog entry comes amid suggestions that the government should step in to impose a minimum size for private homes.
Shoe-box apartments are typically below 500 sq ft. The emergence of such units here is a fairly recent phenomenon although they are common in Hong Kong and Tokyo.
Mr Khaw said in his post that there appears to be demand for shoe-box apartments. The annual take-up of such units has tripled from 300 units in 2008 to 1,900 in 2010, or from 6 per cent to 12 per cent of developers' sales over the same period.
Some 80 per cent of the buyers are Singaporeans. They are presumably buying these units as an investment and hope to rent them out to expats or singles, Mr Khaw said.
He added that industry analysts and developers have told him that many shoe-box units will be completed soon. By 2014, the total number of completed units will increase from 1,100 to 3,800, based on known plans.
In addition, some developers, who have paid high prices for residential plots, are planning to build shoe-box units. This will add to the build-up.
The analysts and developers also noted that the newer shoe-box developments are in the suburbs, and their appeal to tenants remains untested.
Said Mr Khaw: 'Some analysts wonder aloud if buyers know what they are in for. Some have suggested that the government should step in to impose a minimum size.'
'My instinct is not to second- guess the market. Some shoe-box units do add to the diversity of housing options here. But we are closely watching its development.'
He added that, for now, potential buyers should weigh the benefits and risks carefully.
Mr Khaw also said that MND, on its part, requires developers to give an accurate representation of units, both within the show flats and in the sales materials. Analysts can also help to refine their analyses, he said.
Analysts welcomed Mr Khaw's remarks.
'The good thing about his statement is that this is the first time a government official has highlighted the economics of buying a show-box unit,' said International Property Advisor chief executive Ku Swee Yong.
But the analysts also noted that it is difficult to compile data on price trends and yields for shoe-box units as there is no historical data.
'For investors, paying a high psf price for a shoe-box unit could make sense if the unit can command a high psf rent. Right now, we suspect that they can't get those kinds of high rentals, but there is no way to be sure as most of these units are not on the market yet,' an analyst said.
Home buyers could also be pushed to look to smaller-sized units because of rising costs and home prices, said Joseph Tan, executive director for residential at CB Richard Ellis (CBRE).
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