The average price quantum of private units sold declined to $1.2 million in May and June and $1.1 million in July from April’s $1.4 million, but average psf price has played at over $1,000 psf for most months of 2010.
In addition, the average unit size of new units sold also declined to below 1,184 sq ft since April, according to the URA Realis data captured as of August 25 and analysis of caveats of developer sales by CB Richard Ellis since January 2007.
Li Hiaw Ho, executive director at CBRE, said the figures could be attributed to an increasing number of caveats lodged for “shoebox” or “small-format” units from projects like Parc Elegance, Parc Somme, Siglap V, Suites @ Katong, Casa Aerata, Centra Studios and Centra Studios, which have been performing very well since April.
“These units were transacted at between $900 psf and $1,350 psf but their absolute price quantum ranged from $350,000 to $700,000, which made them affordable,” he said.
Some property developers are now keen to shoebox units, which are typically 500 sq ft or smaller, as these kind of units can bring up the average psf price of above the $1,000 psf mark, and at the same time, the lumpsum investment, which is typically below $1 million, seem affordable and appear to become a hit for speculators and investors.
CBRE studied the median psf prices, monthly median absolute price quantum and the median size of private units sold by property developers since January 2007. The company found that the highest peak of the median price was recorded in October 2007 at $2.47 million, while the median unit size was 1,711 sq ft or 159 sq m at a median psf price of $916 psf in that same month, reflecting the popularity of larger units during the time.
The number of shoebox units is coming up in residential projects being constructed on sites of 20,000 sq ft or less located in the Rest of Central Region, in places like Telok Kurau, Guillemard and Geylang.
“From a developer’s viewpoint, smaller units are more saleable and from a buyer’s perspective, easier to buy, whether for speculation or investment, because of the relatively affordable lumpsum investment,” said Mr. Peter Ow, managing director (residential services) at Knight Frank, adding that many developers achieved higher psf prices for these shoebox units.
The trend of shoebox units comes in the scene, but the current wave that started with the launch of The Alexis in February last year have seen unit sizes sink to new lows.
“About five years ago, studio units were about 500 sq ft; now it’s common to find 350-400 sq ft units. Two-bedders used to be around 900-1,000 sq ft; now they could be 700-800 sq ft,” said a developer who declined to be identified.
Mr. Ow said that while the trend is not expected to end soon, many developers may move out from constructing shoebox units when more of the projects are completed and if the units did not achieve the touted high gross rental yields of between 8 percent and 10 percent.
Agreeing with this, the developer said that “it may not be so easy to resell these units when they are completed as buyers can actually see how tiny the apartments are. I think this phase of exuberance in owning tiny apartments will fade when they’re ready for occupation. When more shoebox apartments are completed, the supply will be saturated vis-a-vis the demand.”