Demand for smaller homes on the rise as buyers become price-sensitive

Analysts said developers could start looking at building more smaller units because buyers have become more price-sensitive, pushing up demand for smaller homes.

Caveats lodged with the Urban Redevelopment Authority showed that the number of new units under 800 square feet accounted for about 48 per cent of total sales in 2013.

Over a month into its launch, some 40 per cent of units at UOL’s 555-unit Riverbank@Fernvale in Sengkang have been sold.

But the developer said all the 148 one- and two-bedroom units have been snapped up.

Prices of the one-bedroom apartments start from S$480,000, while a two-bedder costs S$660,000 and more.

With the implementation of new loan curbs last year, industry players said buyers are more cautious about bigger units with larger price quantum.

This trend, they said, will likely guide developers in the planning of unit-mix in future projects.

REMS Advisors found that before the total debt servicing ratio framework kicked in in June 2013, 21 per cent of new units that were sold in the first half of 2013 cost less than S$800,000.

While this fell to 18 per cent just after the framework kicked in, the number has climbed to 41 per cent in the first three months of 2014.

Alan Cheong, research head at Savills Singapore, said: “The sweet spot is quantum-driven, anything that is S$900,000 or less would be where you would find most buyers. The size would then have to be worked around that S$900,000 cap. Anything that is going to be priced from S$400,000 plus for suburban shoebox to S$900,000 for suburban cap, that would be where architects and designers will be designing their units.”

According to caveats lodged, smaller units of under 800 square feet made up nearly 48 per cent of new sales in 2013, compared with 43 per cent in 2012.

This is significantly higher than the 31 per cent in 2010.

While the trend points towards smaller homes, analysts said it is unlikely that homes could shrink significantly.

Desmond Sim, associate director at CBRE Research, said: “There will be a limit as to how unit sizes are getting smaller; there would be a threshold where people will not start to buy… units that are too small. It is well controlled by this 70 square metre but more likely they will like to maintain this sweet spot in pricing to attract demand to buy.”

In 2012, URA placed a cap on the number of private homes in a new project, based on the average unit size of 70 square metres.

This was to ensure that while developers could still build small apartments, there will still be a mix of larger units.

Source : Channel NewsAsia – 20 Mar 2014

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