Sunday, June 26, 2011

Small Condo flats called shoe boxes

Small studio and one-bedroom condominium apartments below 500 square feet (around 46 square meters) are called shoe-box flats and they are recently very popular in Singapore. Just 3 years ago in 2008, there were only 300 units sold, last year this number hit 1,900 and it is increasing. Although the country is land scarce, these units are surprisingly new for Singapore. As lives of single well earning executives does not require a lot of place, there is a demand for these units.

Think about a single working man in his 20s. All he needs is a couch, TV, washing machine, small sink and a bed to be comfortable. A shoe-box can easily host all of these. It is more important to have a private place for himself then the size of the unit he is living in. Guests? For his key guests he probably does not need another bed anyway :) Joking apart, in this century young people tend to stay single for years if not decades. Even if they marry, they tend to delay having kids so they do not need a lot of space and demand for these flats will increase more and more.

In Singapore savings by giving up each room can be more than 12,000 SGD per year, a lot of money by just giving up a space you rarely use or barely need. So demand for these units is not-suprisingly high due to property prices and rents. As square foot price of the private flat goes to sky, about 1,000+ SGD for even so called mass market flats, every meter square you can give up will save a huge amount of money on mortgage. Smaller loan means lower default risk, earlier debt-free life. Smaller portion of your wealth in a single unit means less eggs on the same basket.

And last but not the least, a private home address is a part of Singapore dream (to be exact it is 20 per cent of Singapore dream), and these units allow many Singaporeans to realize this dream within their means.

As National Development Minister recently mentioned, many apartments in crowded large cities are shoe-boxes. By 2014, long needed numbers of shoe-boxes will enter the market and completed units will increase from 1,100 to 3,800.

Many industry analysts and developers are questioning whether people know what they are going into. But as the previous Minister, Khaw Boon Wan also does not want to second guess the market an think these units add to diversity of housing options here. I think developers are afraid that these units will decrease the total price of units and rental yields but the price decrease in this super high prices time is not a bad thing, at least for many who needs a housing unit for its basic purpose, as a shelter.

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