Shrink from shoebox apartments
http://www.straitstimes.com/Invest/S...ry_636871.html
Feb 20, 2011
SMALL CHANGE
Shrink from shoebox apartments
By Dennis Chan , DEPUTY MONEY EDITOR
http://www.straitstimes.com/STI/STIM...SHOEBOX-5Z.jpg
Thanks to the affordable prices and good profit record, studio units tend to be the first to be sold out in most projects. One of the shoebox units which have fetched high prices is a 484 sq ft one at the Optima@Tanah Merah which sold for $1,280 per sq ft, or $620, 000, last September. -- ST FILE PHOTO
There is a Foochow fishball noodle stall at a Zion Road coffee shop that I used to patronise regularly as it was near my office. While the noodles lacked the springiness of, say, the Pontian version, the fabulous fishballs - stuffed with minced cuttlefish and fish fillings - more than made up for it. For $3 a bowl, you got a decent serving of noodles plus six fishballs of various varieties.
My patronage dropped sharply in 2002 when my office moved from Kim Seng Road to Toa Payoh North. There were the occasional visits when I needed to satisfy my pangs for Foochow fishballs but over time, they grew less frequent. After a while, they stopped.
A few months ago, I dropped by for a meal as I was in the vicinity. The taste was as good as I remembered it and the price remained the same. But to my dismay, the portion had shrunk visibly and I got two fewer fishballs than before. And this was before the recent hike in the prices of key ingredients like wheat flour. Does the proprietor now serve one fewer fishball, I wonder?
The shrinking fishball conundrum reminds me of the state of our residential market.
It never fails to amaze me how popular shoebox units have become with home buyers.
Shoebox units are generally defined as apartments below 500 sq ft but in today's market, many are significantly smaller.
The smallest apartments in Singapore can be found at the Suites@Guillemard, a boutique development. The smallest unit is all of 258 sq ft, the size of a hotel room. Nonetheless, the project was a sell-out.
Do the buyers and others who bought similarly small units elsewhere know what they are getting into? Perhaps not.
I believe the over-exuberance over shoebox apartments is one reason for the recent push, by the authority that oversees private housing, for greater transparency among developers in depicting their showrooms when selling uncompleted homes.
For the uninitiated, new homes in Singapore are sold off the plan. But unless you are an architect or skilled in technical drawing, it is hard to visualise the house from merely looking at a floor plan. Hence, developers build showrooms to help prospective buyers see the unit in the right perspective.
However, some developers and their interior decorators have resorted to smoke and mirrors in making their showrooms seem larger than their actual sizes.
This usually involves removing structural walls and pillars, raising ceiling heights and straddling furniture between living room and balcony.
If the Urban Redevelopment Authority's drive towards greater transparency is realised, buyers can then see for themselves the actual layout of the apartment at the showroom.
This is important as more and more greenhorns enter the market.
According to a recent Savills findings reported in The Business Times last week, an increasing number of Housing Board dwellers are buying shoebox apartments.
These buyers have grown exponentially, from caveats for 59 units lodged in 2006 to 1,016 last year, exceeding the 857 shoebox units bought by those who live in private homes.
I am not debating the merits of shoebox homes.
Indeed they may become one of the mainstays of future living as households shrink and a rising number of people choose to live alone.
But I urge caution against passively accepting smaller and smaller space. At what point do we say enough is enough? Must we accept cramped housing as the de rigueur of modern living with nary a peep?
At my favourite Foochow fishball stall, it used to be six fishballs in a bowl of noodles. Today it's four. Will it become two tomorrow?
Will a day come when the noodles are served with no fishball at all and the signage is changed to Foochow noodles instead of Foochow fishball noodles? I would rather he increase the price than cut further.
Many developers these days are like the noodle seller. Some have gone further. Not only have they reduced the size of homes but they have also increased prices.
An acquaintance who bought a shoebox unit in a new project somewhere in Serangoon Road was taken aback when he saw the size of his flat after getting his keys early last year.
He bought it as an investment but has since found it hard to rent it out as potential tenants were put off once they stepped into the claustrophobic space. Last I heard, the unit has remained vacant.
As more and more such sub-sized shoebox units are completed, there is some concern that a similar fate awaits them. If ordinary tenants don't find such housing conducive for long-term stay, will the owners resort to renting out to all and sundry on short leases? What kind of tenants might these be?
On the other side of the coin, some people have argued that Singapore is heading the way of Hong Kong and New York, where people generally have accepted cramped quarters of as little as 200 sq ft to 300 sq ft as a way of life.
Furthermore, who am I to question sub-sized units when the market positively demands it?
Thanks to their affordable price quantum and good profit record, studio units tend to be the first to be sold out in most projects.
Even the much-criticised small units at Suites@Guillemard have made profits for their buyers.
A check of some recent caveats showed that some initial buyers have already pocketed profits in the sub-sale market. For instance, a third-floor unit bought in November 2009 at $1,475 per sq ft (psf) was resold in January this year at $1,637 psf, earning the investor a gross profit of $41,796.
Assuming he had paid 40 per cent of the purchase price of $380,550 (payment schedule is based on stages of completion of the project), this works out to a return of 27 per cent in little more than a year.
But with the introduction of the latest cooling measures in the form of heftier sellers' stamp duty and bigger down payment, the sub-sale game is all but over.
So if you are still bent on investing in a shoebox unit based on its floor plan, I suggest that you lower your expectations. And when you are handed the keys, lower them further.
[email protected]
