The number of shoebox units (small apartments) in Singapore will increase from 2,500 currently to 9,700 by 2015, the government said.
Currently around 8 out of 10 shoebox apartments are located in the city. These units appeal to singles and expats with lower transportation costs and travelling time to their workplace.
But analysts question the appeal of such units in the heartlands where HDB flats are in abundance, providing more space for less rental.
Low mortgage rates and plenty of liquidity were pushing investors to property, but speculation may be waning.
Since the latest property cooling measures in December, transactions of uncompleted units in the secondary market dropped to four per cent, while foreigners and companies purchases of private residential properties dropped to seven per cent.
Residential land sales has also increased.
“The market is a lot cooler than it was, say, one year ago,” Minister for National Development Khaw Boon Wan said. “(But) there are pockets of hot activities, particularly in the mass market, with the emergence of these shoebox units.”
Shoebox units made up 27 per cent of new home sales in the first quarter of 2012.
But unlike the soft landing of most property segments, analysts warn rentals and resale values of shoebox apartments could drop drastically.
“Shoebox would be the first to suffer,” research head of Chesterton Suntec Colin Tan said.
“We may get (a situation) where there will be falling prices for small apartments, and then rising prices for normal-sized apartments because they simply do not meet the requirements of the family.”