Small-sized studio apartments although squeeze for some, have been achieving record prices, even in less glitzy areas outside the city centre.
So-called shoebox apartments which are less than 500 sq ft in size, first made their presence felt around 2006 in mainly prime districts. An example is Robertson Edge off Mohamed Sultan Road.
The trend has since spread to regions outside the central area.
In fact, a 474 sq ft apartment at The Scala, near Lorong Chuan MRT station, was sold for $1,522 per sq ft (psf) – or about $720,000 – in August.
Experts said this was likely to be a benchmark price set for a 99-year leasehold project outside the central region. Another two similarly sized apartments sold for $1,467 psf and $1,437 psf last month.
Other apartments which have fetched high prices include a 484 sq ft unit at 99-year leasehold project Optima@Tanah Merah, which sold for $1,280 psf, or $620,000, in September.
A 420 sq ft unit at Siglap V transacted at $1,584 psf or $665,000 in August, while a 409 sq ft unit at Suites@Changi sold for $1,379 psf or $564,000 in September. Both projects are of freehold status.
Experts said buyers are drawn to the more affordable investment prices of shoebox units, compared with those of family-sized homes. The rising prices of Housing Board flats might also have nudged some to buy private properties at comparable prices instead.
The success of earlier shoebox developments, which have enjoyed capital gains in line with the market and higher rental yields, has also fed the trend, they added.
CB Richard Ellis said about 10 residential projects featuring predominantly small-format units will be launched in the next few months. Most are in suburban areas like Telok Kurau, Siglap and Eunos.
Cushman and Wakefield’s senior manager of Asia-Pacific research Ong Kah Seng said most shoebox apartment buyers are price-sensitive, and similar in profile to the typical buyers of suburban condominiums. Such units are thus increasingly popular, even if they are in non-prime areas, he said.
‘Buyers of shoebox units are mixed in profile, but are usually singles or couples without kids, who do consider renting out the units… although the majority do not mind using them for owner occupation should there be limitations in finding the right tenants,’ added Mr Ong.
Mr Colin Tan, head of research and consultancy at Chesterton Suntec International, said that with the market flush with liquidity, investors are constantly looking for avenues to park their cash.
And because investors have dominated sales, the attractions which owners usually look for, such as amenities, security and surroundings, matter less, he said. Instead, accessibility, such as being close to an MRT station, takes precedence.
Mr Tan added that small-format units are a consequence of high property prices, and as long as prices continue to rise, more of such units can be expected.
Kim Eng Research analyst Ooi Yi Tung said shoebox units offer an alternative to buyers who are priced out of the larger private property market and ineligible for Housing Board flats, or reject public housing for its perceived lower quality and lack of facilities.
Shoebox units also achieve slightly better rental yields than larger units because of their lower prices. Robertson Edge, for example, fetches a rental yield of 6.6 per cent, while the average yield for a centrally located condominium is 3 per cent to 4 per cent, he said.
Mr Ching Chiat Kwong, chief executive of property developer Oxley Holdings, said that as small units have affordable prices, buyers need not take huge loans and do not need to fear interest rate hikes.
Buyers of its units have included not only investors, who target the expatriate singles market, but also owner-occupiers who are mostly singles, young couples and some retirees who desire the ease of maintaining a small home, Mr Ching said.
He added: ‘Although young people are mobile and seek an independent lifestyle, they like to live near their parents. So it’s not surprising that you see people buying small units in suburban mature areas to be near their parents.’
But risks remain, as shoebox units are more vulnerable during an economic downturn, should the expatriate tenant population shrink.
Said Mr Ong: ‘During challenging economic times, it’s likely that local professionals will be cautious in spending, including on accommodation. There may be some who will choose to stay with their families until the economy shows strong signs of recovery.’