Potential buyers should look at shoe-box units with caution: Khaw

National Development Minister Khaw Boon Wan has urged potential homeowners to weigh the benefits and risks of buying so-called “shoe-box” apartments.

These are housing units which measure 500 square feet or less.

In his latest blog entry, Mr Khaw said the government is watching the development of these units.

Last year, about 1,900 of such apartments were sold, compared to 300 units in 2008.

In proportional terms, the take-up rate last year stood at 12 per cent of developers’ sales, up from six per cent in 2008.

Four in five buyers were Singaporeans looking for an investment opportunity – undeterred by the fact that these are priced 10 or 20 per cent higher per square foot (psf) than larger units in the same development.

Many rent to expatriates or singles.

PropNex director David Poh said: “The total area is smaller, so even if you times a higher per-square-foot, you still get a smaller total lump sum payment. Which is more affordable for homeowners and investors to enter the market.”

Mr Poh added when the units are sold, they’re also sold on higher psf terms compared to units of other sizes.

He noted a typical 400 square feet unit in town may cost some S$1,500 psf, which works out to about S$600,000, which still appeals to buyers as larger units of about 1,000 sq feet in the same area tend to cost upwards of S$1 million.

But industry observers doubt the trend can be sustained.

In his blog, Mr Khaw outlined some concerns.

These include more completed units by 2014 — when total number of units will rise from 1,100 to about 3,800 — and the fact that some of the newer developments are in the suburbs, where their appeal to tenants is still untested.

Figures by the Urban Redevelopment Authority give an indication of the number of suburban developments.

As of March, there were about 3,300 units that have been sold and will be completed in the next few years.

Twenty-three per cent of them are located outside the central region, compared to 17 per cent of the existing stock of 1,100 completed shoebox units currently.

Mr Khaw added that some developers who bid high prices for land, are also planning to build shoe-box units, adding to the supply of such homes.

Some analysts have wondered if buyers know exactly what they’re going in for, and have asked for the government to impose a minimum size.

But Mr Khaw said he would rather not second-guess the market. Besides, shoebox apartments add diversity to housing options here.

He pointed to recent rules that require developers to give details of each unit’s layout, and the prices of all units.

The aim, he said, is to make sure buyers know what they’re paying for.

Source : Channel NewsAsia – 24 Jun 2011

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