Price of new homes plummets as square footage shrinks

(Housing prices plummet as buyers snap up shoebox units. Image courtesy of Thinkstock.)

Property firm CBRE said that the proliferation of small homes with cheap price tags—typically 500 sq ft or less—has dragged down average prices among new condominiums by 22 per cent.

And although buyers appear to be snapping up the smaller apartments, it remains to be seen whether the trend for less space is sustainable.

Shrinking spaces

To highlight the extent to which new condos have been shrinking, figures show that the median size of new units has dropped from 1,249 sq ft in the third quarter of 2009 to 721 sq ft in the first quarter of this year.

There is further evidence of this new wave of small apartments in the number of caveats lodged in the last year. The 13,611 lodged for new homes amounted to $16.6 billion last year—a drop from the $21.2 billion in 2010, even though the number of caveats that year was only a little higher at 13,933.

This trend doesn’t look set to slow as developers rush to cash in on the compact apartment boom; recent property statistics show that more than one in four new home sales in the first quarter of the year was a shoebox unit.

Urban Redevelopment Authority (URA) data also showed that the stock of small units will surge from about 2,400 at the end of last year to 8,200 units, or more, by the end of 2015 - a figure that could prove to be higher. Some upcoming projects featuring these flats include Punggol's Watertown and Parc Rosewood in Woodlands.

However, despite proving popular with developers, and buyers who seem willing to trade in less space for a smaller price tag, National Development Minister Khaw Boon Wan said, in an interview with the Straits Times, that the Government is keeping an eye on the rise of shoebox units and will ‘step in’ if necessary.

Government could step in with restrictions

Also speaking to the Straits Times, R'ST Research director, Ong Kah Seng, has suggested restricting these units in some condos, particularly those that attract people upgrading from HDB or those in popular neighbourhoods with good schools.

Until recently, small units were mostly found in city-fringe locations, but they have since proliferated widely.

Cramped areas such as Telok Kurau and Joo Chiat have already imposed such schemes to protect the size of residential properties with a minimum plot size of 1,000 square metres.

Changing trends

Lower price is one obvious factor drawing buyers to small apartments but another theory is Singapore’s changing living habits. For instance, to a growing number of couples looking for their own homes, small and well-priced flats are certainly appealing.

There is also no denying that high property prices have forced low- to middle-income buyers to accept less space.

However, it’s not yet known if this is a long-term trend. The Straits Times spoke to Credo Real Estate executive director, Ong Teck Hui, who said: “It remains to be seen if there is really widespread demand from tenants or owner-occupation […] if it doesn't pan out, it'll be an economic waste.”