Saturday, October 1, 2011

Popularity of Shoebox apartments increase

Singapore has recently became a place as expensive as Hong Kong and Tokyo and since then a previously rare apartment type, shoebox apartments, (very common in those cities) started to become very popular. I have started like this because I still see people trying to figure out why they are so popular. I am surprised that people are surprised with this popularity in a place where a so-called mass market, non-shoe box private residential unit is a million dollar expense!

Shoebox apartments are those flats smaller than 500 sq ft. Many of these units are in fact at most as large as a hotel room. Into 2011 their popularity is increasing:

"Shoebox apartments, generally defined as private residential units smaller than 500 sq ft, are increasingly gaining popularity in Singapore, accounting for 7 per cent of condominium sales over the past year, up from 4.2 per cent the previous year.

On average, 197 shoebox units were transacted per month between August last year and last month, with their average price at S$1,546 psf, according to an report. This is 42 per cent more than S$1,090 psf for condos from 501 to 1,500 sq ft, and 25 per cent more than S$1,232 psf for condos larger than 1,500 sq ft, said."[1]

Although the per sq ft price of shoe-box units are higher, their overall price is lower than larger units so they are more affordable. Some people are concerned with their number since many of these units are bought for investment and will hit the rental market thus "depressing" the rental prices. If you are one of those who welcome a fall in ridiculously high rentals then you will welcome their presence. Besides, they optimize the use of space on a land scarce island and is a good "single" person home.

Some think they will have hard time to attract tenants, especially if normal properties become more affordable. Well if landlords buying these units are dreaming to charge very high rentals in the upcoming years yeah then they will have hard time to attract tenants. On the other hand on an island where population of singles are increasing (32 per cent of Singapore population are single compared to 32 per cent in 2000) there will always be enough demand for smaller, centrally located and cheaper units.

[1] - Shoebox apartments getting more popular 

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