Wednesday, March 23, 2011

Singapore small studio and one-bedroom condominium apartments


Small studio and one-bedroom condominium apartments are a new and hot topic in Singapore with their increased popularity and calls from their opponents for more regulation on these units. These condo units are also called shoebox apartments or mickey mouse (MM) apartments, usually by their opponents, I guess to ridicule them and their buyers.

These condo apartments are generally below 500 sq ft but there are many of them which are significantly smaller. For example at Suites@Guillemard, a boutique development, the smallest condo unit is 258 sq ft. (See floor plan of these below).

Small studio and one-bedroom condominium apartments are selling hot. "In 2009, according to caveats lodged with the Urban Redevelopment Authority's Realis system, a record of 696 flats which are 500 sq ft or less in size, were sold.  As of Oct 2010, the median psf price of such apartment has risen to S$1,314 psf as compared to 2009’s average of S$1,190 psf."[1]

But there are many who criticize these flats. In Feb 2011 Dennis Chan wrote an article against these units and claimed that the buyers of these units propably do not know what they are getting into [2]:

"Do the buyers and others who bought similarly small units elsewhere know what they are getting into? Perhaps not. 
I believe the over-exuberance over shoebox apartments is one reason for the recent push, by the authority that oversees private housing, for greater transparency among developers in depicting their showrooms when selling uncompleted homes.  
For the uninitiated, new homes in Singapore are sold off the plan. But unless you are an architect or skilled in technical drawing, it is hard to visualise the house from merely looking at a floor plan. Hence, developers build showrooms to help prospective buyers see the unit in the right perspective."

He also mentions that "it never fails to amaze him how popular shoebox units have become with home buyers." Well it would not fail to amaze me if they did not became popular! When I first came to Singapore in 2006, my project manager was living in a 3+1 condo flat (rented back in 2003) for 1800 SGD per month. The usual price was 2,000 SGD per month for this unit in Pasir Panjang Road. My boss was in Leonie Gardens for 4,500 SGD per month (left in 2007 when his landlord asked 7,000 SGD per month to renew contract). Now you can hardly rent a 2+1 HDB, outside the city center for 1,800 SGD. Leonie Gardens flats are hardly below 10,000 SGD per month range! City center and any conveniently located flat became just to expensive to rent and buy flat. Property sales prices also went up accordingly. It is very natural that this price hike would put "normal" properties out of reach of many and these many would create a demand for smaller units, both to buy and rent.

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Most of these people think all folks out there look at a house with their perspective. But there are a lot of people, very young as well as old couples living without kids who appreciate the location and price over the size of the unit.

There is also a feeling that these units will be hard to rent out. I believe opposite is true. Back in 2009 when I was single, I rented out a single room unit (not a room) from a studio development for 1800 SGD per month and all the 600 units were rented out in a month. You would be amazed how many expats as well as Singaporean youngsters were happily renting common room units, and master room units. There was a huge demand for those small units because the location was amazing, Grangeford Apartment right next to the Orchard Road. These units were not shoebox apartments and divided against URA guidelines so the project shortlived. But my point was there was a rush of demand, also from expats, I guess a little scary for those who are trying to rent out their overpriced units to expats.

Those who think small condo units are not easy to rent ignore thousands renting rooms here in Singapore. They also do not recognize rents in Singapore went from expensive to ridiculous region a couple of years ago and there will be a lot of people out there who would happily sacrifice the space for price and location. Won't they have enough space? Well they will. Not enough for you but definitely enough for them. New generation usually relaxes and sleeps at home, they meet outside, they hardly visit each other but go out together. It is absolutely convenient here in Singapore to never have visitors to house, and do not forget,  there is no winter in Singapore to lock us to our homes.

258 square feet (24 square meters)
floor plan of small condominium units at Suites@Guillemard - Source: h88.com.sg
Suites@Guillemard - Source: h88.com.sg

On the other hand small units have a lot of advantages for owners, tenants and I believe they are good for Singapore. Good for Singapore because we all know and always hear that Singapore is land-scarce and it is a real waste of resource when a single person or a new wed couple occupies units larger than 700 sq feet. Smaller units use the scarce land in the most efficient way. I am actually amazed how many 4+1 and 5+1 units out there in this small island while land is scarce and expensive.

It is good for buyers because they provide cheaper private home ownership. Good for tenants because they offer cheaper rent in more central places[1]. The only danger is if they are overbought (unlikely under property cooling measures).

Yes there are many people living in shoeboxes in major cities and as young generation marry and have kids later and they do wanna have a private place earlier there will be plenty of demand for smaller but cheaper units.

Smaller units also mean less mortgage (risk) to take, earlier payment of debt, easier access to private housing. Do not think these units are only for young people. They are also very suitable for older people whose kids left home or singles.

Nevertheless, there are people out there calling regulations on small condo units. Most of them just think people buying these units do not know what they are doing. National Development Minister Mah Bow Tan in an interview gives these people the answer they should get:

"If people want to buy shoebox units and prepared to pay those prices, why should we stop them? Some have called us to intervene, to prevent people building and selling such units but how can we do that? ... There are many other things to worry about. "[3]

Yes if there is a demand for these units, what is wrong to prevent them? Mr. Mah also mentioned that these units are only 5 to 6 percent of all transactions.  These units are already covered under private property cooling measures with others to prevent a bubble.

Disclaimer
This blog article is to provide general information only and should not be treated as an invitation to buy or sell any property or as sales material.  Users of this report should consider this report as a one of the many factors in making their investment decision. Users should make reference to other sources of information and specific investment advice to obtain a more objective view of the property market. Asia Singapore shall not be responsible for losses suffered.

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