September, 2011:

Times, as anyone who has read a headline lately can tell, are tough. The world seems to be in a cycle of economic decline and hardship. As a result, the real estate market has seen a rise in demand for cheaper, smaller apartments, 500 square feet or under. Sometimes referred to as ‘shoebox apartments’, these one-person flats have sold like hotcakes in Singapore. In 2008, 300 units were sold. Last year, the number was 1,900, representing a 12% share of new private home sales, compared to 6% in 2008.


(Shoebox apartments are increasing in popularity.Image courtesy of thinkstock.)

While some may sniff at what can be a cramped style of living, shoebox apartments are excellent choices for singles or those on a tight budget. And that’s not all. In her recent article on the topic, Straits Times writer Denise Chong made the excellent point that shoebox apartments can be an indicator of the liveability of a city. “Your country or city as a whole,” she writes, “needs to be civilised before you can feel like a million bucks in 500 sq ft.”

Shaun Di Gregorio, CEO of iProperty Group, himself espoused the advantages of smaller-sized properties, citing the burgeoning affluence of the local populace and increasing property prices in Singapore as factors making shoebox units “attractive investment opportunities.”

What it sometimes comes down to, as the saying goes, is that size doesn’t always matter. Much like zippy pint-sized smart cars and staycations instead of vacations, the rise in popularity of sensible, no-nonsense shoebox apartments is a sign of the prudent times. In a time of global belt-tightening and economic cautiousness, small apartments represent both a sound investment strategy and viable living strategy.  London, New York, Hong Kong and Tokyo, some of the busiest and most booming metropolitan areas in the world, are all cities where a shoebox apartment is often the norm, particularly for recent graduates or those just starting the climb up the property ladder.

In Singapore, there are a number of condos that cater to buyers looking for cosier living spaces. Spottiswoode 18 is one example. The 250-unit property, due to see buyers moving in at the end of 2014, has 150 one-bedroom units sized at 387 square feet, as well as 25 1+study units at 506 square feet.

In a June blogpost, National Development Minister Khaw Boon Wan commented on the future surge of shoebox apartments. He explained that “many of these units will be completed soon. By 2014, the total number of completed units will increase from 1,100 to 3,800, based on known plans.” He cautioned, however, the need for buyers to weigh the benefits and risks of their purchases. The smaller scale and layout of shoebox apartment can lead to prospective buyers misunderstanding the true scale of their new living space. “On our part,” he wrote, “we are requiring developers to give buyers an accurate representation of the units they are buying, both within the show flats and in the sales materials.”

Has all this talk of property given you food for thought? If you want to learn more about the local and international property market, investment opportunities and home living ideas, you can head to the iProperty.com EXPO: International Collection on October 29 and 30 at Marina Bay Sands.

There have been talk about apartments getting smaller but not necessarily cheaper.

Shoebox units are generally described as self-contained apartments with a bedroom, living area, kitchen and bathroom all within 500 sq ft. URA recently had an application from a developer to build units less than 300 sq ft, which is more of a hotel room than an apartment. URA rejected the application.

Median psf prices of private condos below 500 sq ft

The highest median psf of shoebox apartment prices across the board was in District 2, at $2358psf. The price is a good $683psf higher than the national average psf for apartments less than 500 sq ft was $1,675 psf. District 2 is right in the centre of town in the Tanjong Pagar area, near the central business district and popular with companies or working expatriates. Shoebox units available here include Skysuites@Anson, Spottiswoode 18 and Dorsett Residences.

The lowest average psf over the year was in District 27 in the Sembawang and Yishun areas, mainly of which were in Eight Courtyards.

August 2011: Average psf prices of private condos below 500 sq ft 

In last month alone, the highest average psf for non-landed properties below 500 sq ft were in District 1 and 4. The Clift and Robertson Edge scored high here.

In terms of sales volume, District 14 saw the largest number of transactions. This could be due to the number of new property launches, such as Sims Edge, Suites@Sims and Suites@Guillemard, just to name a few.

Compare 3-rm HDB Flat to Private condo units below 500 sq ft.  

So how do these shoebox units in private condominiums compare to HDB 3-room flats? A standard HDB flat has approximately 700 sq ft of space, as compared to shoebox apartments which typically measure around 500 sq ft or less.

Prices of a 3-bedroom HDB flat remained steady at between $400 - $500 psf. Whereas prices of shoebox apartments seemed to bloom above $1,000 psf, sometimes reaching close to $2,000 psf and beyond.

The volatility of shoebox units is apparent, though most of the highs could be explained by the launch or new properties in the month with higher uptake of units in specific condos. The new condominium in Bishan, lauded as a design first in Singapore, by International architect, Moshe Safdie, will also have some smaller units which may fit into the shoebox apartment category.

The National Development minister, Khaw Boon Wan, has however warned against the flooding of the market with shoebox units and the Urban Redevelopment Authority has similarly responded by setting stricter control parameters for developers hoping to cash in on this trend.

If you weigh the pros and cons, at almost one-third of the price of a shoebox apartment, a 3-room HDB flat can give you more space. However, you will enjoy less privacy without the conveniences and facilities that come with private apartments, such as swimming pools and clubhouses. What is your choice, and why?

Singapore’s ultra-high-value properties upped 144% in value

 

The past five years has seen billionaire homeowners reap an increase of 144% in the value of their Singapore properties – the highest price hike in the world.

 

(Singapore's ultra-high-value properties - image courtesy of thinkstock)

 

This boosts the average cost of the island’s ultra-high-value homes to about £1,000 per sq ft (psf) or S$1,988 psf, and ranks the country in eighth place out of ten cities studied between December 2005 to December 2010, according to international real estate adviser Savills.

 

Topping the list in terms of price growth are Singapore (at 144%), Mumbai (138%), Moscow (110%) and Hong Kong (83%) – widely considered new world economies. The leaps in price growth reflect the geography of new wealth generations and creation of new billionaires over the period of study.

 

Interestingly, fellow new world economy Shanghai saw a mere 32% growth, suggesting a connection to China’s closed market: the billionaire demand there is solely domestic, whereas the other cities are fuelled by international buyers (except for Tokyo). “Although the numbers of Chinese billionaires are growing rapidly, the middle classes are greater in number and have fuelled price growth in the mainstream markets first. Perhaps prices in the billionaire segment will play catch-up with substantial growth to come,” said Savills.

 

Meanwhile, old world super prime markets Tokyo, London, Paris, Sydney and New York recorded lower growths but continue to dominate in terms of overall price. Savills concluded that their relative price (and political) stability, make them attractive investments. “At the foot of the table, Sydney still offers great value and is extremely well located to take advantage of Asian wealth if and when its policies restricting international buying are relaxed,” noted Savills. Sydney’s ultra-high-value homes had an average price of £590 psf.

For super prime prices, Hong Kong easily topped the list at £6,700 psf, followed by Tokyo (£5,190 psf) and Paris (£3,270 psf).

 

“Global billionaires can make any country their home, and often have several different residences across the globe. Most will seek a base where they are doing business,” noted Yolande Barnes, director of residential research at Savills. “This has the effect of funnelling global equity into the very best residential real estate - a rare commodity in any city. Billionaire buyers demand the best international standards of accommodation and are paying prices to match, creating a super class of global billionaire homes.”

In an overall view, the value of ultra-prime properties soared 65% over the past five years.

During the first half of 2011, billionaire homes increased 10% in value, compared to 6% for the wider housing markets in the ten cities studied.

 

In August this year, Savills revealed that Singapore was the fourth most expensive city, based on a basket of properties required to house a group of executives. The properties in the basket jumped an average of 92% from December 2005 to December 2010.

Mass-market units average $1 million
According to a new study, the average price for mass-market flats in suburban Singapore has surpassed the $1 million mark.

(Mass-market units average $1 million - image courtesy of thinkstock)

Data compiled by Mr Ku Swee Yong, chief executive of International Property Advisor and the Singapore Condo agency, shows that values for new as well as resale private homes in the three months leading up to June 30 averaged $1 million, up from $970,000 in the same period last year. During this quarter, 3,931 sales were made, with the average size spanning 1,157 sq ft and the average price hitting $880 per sq ft (psf).

Head of research at Chesterton Suntec International Mr Colin Tan observed that the million-dollar mark is a psychological threshold, and that developers have been reluctant to push prices above that limit for fear of not being able to sell homes at that price.

That being said, Ku let on that with prices of suburban properties inching upwards in recent quarters, crossing $1 million was a “foregone conclusion”. He added that as prices of Housing Development Board (HDB) flats continue increasing, the sizeable percentage of home-seekers looking to upgrade are more willing to spend on their new flats.

Mr Ong Kah Seng, senior manager for Asia Pacific research at Cushman and Wakefield explained, “One factor could be that developers have already paid out a certain amount for land and that's why they are pegging their prices at that level. Also, the new homes could be built with more premium features to justify the increased price.”

While Singaporeans still make up a huge percentage of suburban homebuyers, things look set to change as Tan revealed a growing interest on city-outskirt units from foreign buyers. “Singapore is becoming a well-established safe haven for people looking to invest their money. But with the strengthening of the Sing dollar, it could mean that foreign investors who would typically have their eye on mid-market homes are now also considering mass market suburban homes too,” he told The Straits Times.

The other psychological barrier is the $1,000 psf mark, which analysts consider to be one of the final frontiers left to cross in the suburban property front. In fact, prices of new suburban projects like euHabitat (at Eunos) and The Luxurie (at Sengkang) have either barely reached the mark or slightly surpassed that threshold. However, insiders dismiss those as outliers, and say it is unlikely that $1,000 will become the new average psf across the board.

According to Ong, buyers will still be keen in projects with unique selling points, but there may be a mismatch between the expectations of sellers and the willingness of buyers to shell out such amounts of money. The current economic uncertainty is also deterring homebuyers from doing so, but Ku said that if the Singapore economy continues growing (and the global situation continues with its current stability), average psf prices could rise. On suburban areas like Punggol, Sengkang and Pasir Ris – which will herald some 28,000 new public and private homes over the next five years – analysts do not expect prices to soften much in response. “I don't think we will see the average transaction price and average psf prices come down, especially when interest rates are so low and there's still liquidity in the market,” said Ku.

Ong he added that suburban mass-market units are generally considered the most affordable among private homes, so crossing the $1 million barrier could raise more concerns about affordability among buyers.

Singapore’s ultra-high-value properties upped 144% in value

 

The past five years has seen billionaire homeowners reap an increase of 144% in the value of their Singapore properties – the highest price hike in the world.

 

(Singapore's ultra-high-value properties - image courtesy of thinkstock)

 

This boosts the average cost of the island’s ultra-high-value homes to about £1,000 per sq ft (psf) or S$1,988 psf, and ranks the country in eighth place out of ten cities studied between December 2005 to December 2010, according to international real estate adviser Savills.

 

Topping the list in terms of price growth are Singapore (at 144%), Mumbai (138%), Moscow (110%) and Hong Kong (83%) – widely considered new world economies. The leaps in price growth reflect the geography of new wealth generations and creation of new billionaires over the period of study.

 

Interestingly, fellow new world economy Shanghai saw a mere 32% growth, suggesting a connection to China’s closed market: the billionaire demand there is solely domestic, whereas the other cities are fuelled by international buyers (except for Tokyo). “Although the numbers of Chinese billionaires are growing rapidly, the middle classes are greater in number and have fuelled price growth in the mainstream markets first. Perhaps prices in the billionaire segment will play catch-up with substantial growth to come,” said Savills.

 

Meanwhile, old world super prime markets Tokyo, London, Paris, Sydney and New York recorded lower growths but continue to dominate in terms of overall price. Savills concluded that their relative price (and political) stability, make them attractive investments. “At the foot of the table, Sydney still offers great value and is extremely well located to take advantage of Asian wealth if and when its policies restricting international buying are relaxed,” noted Savills. Sydney’s ultra-high-value homes had an average price of £590 psf.

For super prime prices, Hong Kong easily topped the list at £6,700 psf, followed by Tokyo (£5,190 psf) and Paris (£3,270 psf).

 

“Global billionaires can make any country their home, and often have several different residences across the globe. Most will seek a base where they are doing business,” noted Yolande Barnes, director of residential research at Savills. “This has the effect of funnelling global equity into the very best residential real estate - a rare commodity in any city. Billionaire buyers demand the best international standards of accommodation and are paying prices to match, creating a super class of global billionaire homes.”

In an overall view, the value of ultra-prime properties soared 65% over the past five years.

During the first half of 2011, billionaire homes increased 10% in value, compared to 6% for the wider housing markets in the ten cities studied.

 

In August this year, Savills revealed that Singapore was the fourth most expensive city, based on a basket of properties required to house a group of executives. The properties in the basket jumped an average of 92% from December 2005 to December 2010.

A medley of public and private housing, Executive condominiums’ (ECs) flexibility make them a natural magnet for prospective homeowners. ECs proved popular with buyers when they were reintroduced to the market after a quiet period of five years.


(Executive Condominium's are proving popular with more and more people. Image courtesy of Blossom Residences)

Noting their attractiveness, a spokesman for Austville Residences in Sengkang commented that “With increased incomes and widespread aspirations of living in a condominium among Singaporeans, young couples and HDB upgraders will always consider ECs as a housing option, especially when EC prices continue to be below those of private condominiums.”

Since their arrival back on the housing market last year, eight EC sites have been sold to developers. A Kim Eng research paper noted that a total of 4,194 units have been released for sale.

As such, it didn’t take long for the revised rules about income ceilings for EC buyers to convert into market change. Mere days after the raised income ceilings were backdated, thus including all unsold units, sales of ECs were notably boosted.

The revised household income cap (previously $10,000; now increased to $12,000) was last Wednesday announced to apply to a host of other EC projects, all with unsold units. The group of five ECs were not included before the change, as the rule applied only to projects launched after August 15. With this amendment, developers are reporting speedier sales.

Qingjian Realty, for example, informed The Straits Times that over 50 units have been bought up since last Wednesday. They add that a large portion of buyers were those that had been affected by amended income ceiling level, with incomes between $10,000 and $12,000. With that boost, 468 of the 504 units have thus been sold.

Units in other ECs are similarly being filled. The 602-unit Blossom Residences, standing prominently in Segar Road, now has 400 occupied units, thanks to a further purchase of 20 units in the past seven days. “We expect to see continued healthy sales based on the positive feedback from this group of potential buyers,” says Mr. Chia Ngiang Hong, group general manager of CDL. He explained that buyers are praising this latest announcement as beneficial, as it helps them to broaden their options.  He added that roughly one in two of the latest group of buyers fell into the $10,000-$12,000 category of income.

Austville Residences experienced its own surge, says their spokesman, with its show flat packed with twice the usual number of visitors this weekend. The project, launched in January, has now sold 65% of its units. Several buyers who were previously excluded due to their incompatible income level returned, making their purchase once the new rule was made public.

The modified income ceiling requirements have allowed roughly 600 unsold units, spread across five previous ECs as well as the more recent Arc at Tampines, to become available. Overall, UOB Kay Hian’s property analyst Vikrant Pandey approximates that 68,700 additional households now qualify for ECs.

As for the future, a Kim Eng research note said that over the next year, more than 3,000 units are predicted for release. If the past week’s events are anything to go by, it looks like they will find a healthy number of buyers eager to purchase their dream home.

According to one property expert, the throngs of new immigrants to Singapore will continue to spur demand, preventing prices from falling despite the wave of new flats entering the market.


(The influx of people will ensure demand for new homes, so prices are unlikely to fall, according to Dr Chua)

Head of research at Jones Lang LaSalle (JLL) South-east Asia Dr Chua Yang Liang explained that history has shown Singapore’s housing prices are driven mostly by sentiment, not just stock levels. Strong demand will allow the sector to thrive amidst an estimated influx of 100,000 homes – both public and private homes – that will complete come 2014 and 2015, he said.

These new homes will impact prices and might slow the gain in the Urban Redevelopment Authority’s (URA) property price index to a rough average of 1.8% to 7.5% a year from now until 2015 – depending on immigration inflow.

However, given how the growing population has outpaced the increase in housing numbers, demand will probably stay strong, added Dr Chua. He said the population has expanded by some 2.8% on average in the past decade, while the number of completed homes has increased by 2.1% a year.

Dr Chua’s view goes against that of many industry analysts, who maintained that prices look set to fall in coming years, especially in the mass-market segment where most soon-to-be-completed homes are. They find the market cyclical, and that ups and downs are unavoidable. One commented that given current economic uncertainties, there is more than a 50% chance of a correction in the next three years. The bumper crop of state land released and the ramping up of new HDB flat launches have prompted some to forecast plunging suburban home prices by as much as 15%. However, recent global economic uncertainties (and the consequent weakening of the share market) have raised doubts that the market is sustainable.

Dr Chua commented that the market is ‘fairly resilient’; it has only corrected in the past due to external shocks like the bursting of the 2000-01 dot.com bubble and the 2007-08 global financial crisis, which saw prices diving. He added that even during a period of healthy supply, like in 2003 and 2004 where about 60,000 completed homes were available for owner-occupation or leasing, prices remained flat and refused to fall.

Meanwhile, despite expectations of slowing immigration, the influx is unlikely to halt entirely, as these people are needed to support Singapore’s economic growth. This means housing demand will be kept stable enough to support the injection of new supply over the upcoming years, observed Dr Chua. “Undoubtedly, the current increase in global economic uncertainty is likely to dampen sentiment here, resulting in short-term fluctuations in demand and prices but, overall, the mid- to longer-term outlook remains stable on the back on these fundamentals,” he said.

JLL estimates that even with increased housing supply, demand will still be greater until 2015, as cumulative housing stock shortage had ballooned to about 87,000 homes last year. This assumes a tighter immigration policy, with the population growing to 5.2 million by 2015.

Dr Chua advises that policymakers to continue releasing land to support the development of between 16,000 and 24,000 new homes a year, depending on immigration levels.

An interesting note is that the rental market will likely see an oversupply over the next few years regardless as a significant number of buyers have bought units as investments.

Whether this trend will have an impact home prices will depend on future economic development.

The recent housing policy reviews have put the industry and home buyers on the spot. Many may still be dithering between both property types, and weighing the pros and cons. Let's see if these figures will help you make your decision. Our focus this week is on one of the more idyllic areas of Singapore - District 18 in the East, consisting of Pasir Ris, Tampines and Simei.

Though still on the incline, overall non-landed home resale prices grew just marginally in July, with a large contribution from a much stronger price hike in the ‘shoebox’ unit segment. Even so, compared to June’s 2.4%, prices of these 500-sq-ft-or-less homes rose at a rather subdued pace of 1.4%.


(The resale market slowdown could be due to uncertain economic conditions in the US and Europe)

Singapore Residential Price Index (SRPI), which monitors non-landed completed projects and their transactions, estimated an overall price growth of a mere 0.2%, much lower than June’s 0.7% mark.

Singapore and South East Asia head of research for CB Richard Ellis Ms Petra Blazkova attributed the drop in interest and demand for small homes to uncertainties caused by the economic crises in both the United States and Europe. She explained, “In the long term, we will continue to see more interest, possibly until 2012. The supply of such homes remains steady and smaller units are seen as a more affordable class of property for those who are interested in putting their money in property.”

Echoing her sentiment is Knight Frank’s research head Mr Png Poh Soon, who told The Straits Times that property buyers may also be banking on the long-term potential of these homes, especially if they are found in well sought-after locations like the upcoming commercial hub in Paya Lebar.

Based on location, suburban home prices seem to be on a stable growth at 1.2%, unchanged from June. (Central-district home prices plummeted 1.3%.) Despite the thriving buyer interest in suburban resale properties, observers expect the recent revisions to income limits for public housing to significantly bring down demand, because the higher income ceiling would allow more home-seekers to buy HDB flats.

It is expected that the next few months will see resale home prices reflect this shift in buyer preference towards public housing, where they would have otherwise purchased private property. As such, analysts say the true effects of this policy change will be felt when newer public housing projects are released. In this sense, the most recent 0.2% growth in resale prices could foreshadow months to come, and is a good indication that the market is finally finding equilibrium despite external environment uncertainties clouding buyer sentiment.

Meanwhile, another group of homebuyers are taking advantage of this dip in demand and turning it into an investment opportunity. Said Png, “[This] group is made up of people who still believe that with interest rates remaining low, property is a less volatile investment than putting money into the stock market. Even if prices drop, these people will hold on and rent their apartments out.”

Head of research at Jones Lang LaSalle South-East Asia Dr Chua Yang Liang anticipates slower price growths due to doubts over the current global economic conditions. Some fluctuations can be expected from the resale market, but Dr Chua said that it is likely prices for the segment will stabilise throughout the remaining months of 2011. He added that prices for both new and resale property might appreciate between 1.5% and 2% in this period, and ultimately increase by some 7% for the entire 2011.