Analysts expect shoebox rents to drop 5%-10%

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30-12-14, 07:07
k00L

Analysts expect shoebox rents to drop 5%-10%

Dec 29, 2014

Property analysts expect rentals of shoebox apartments to fall by five to ten percent in the coming years, on the back of an expected increase in supply, reported the media.

Notably, around 6,200 shoebox units are slated to be completed over the next two years. This is a record number compared to the yearly average of 3,000 units during the last decade, said property consultant SLP International.

SLP noted shoebox units located near MRT stations or within the city centre would enjoy better rentals compared to others.

“Those shoebox developments that are located away from the city or MRT stations, I think they will not be doing very well in terms of their rental demand,” said Nicholas Mak, Executive Director of research & consultancy at SLP International.

“And furthermore, if they are located within the suburban areas where typically family units are in more demand, such developments may actually languish in the rental market,” he added.

Shoebox units are generally small apartments with a space of less than 50 sq m.
30-12-14, 07:18
Ringo33

teddybear fake account in action again....LOL!!
30-12-14, 08:51
Luke65

Shoebox units will command good rental yield only in good locations. Generally those units are for the segment that want to live it up but had limited rental budget or individual who want a good location. Target profile are usually single expats. Those shoebox units out in neighbourhood competing with ECs and HDBs is almost a sales tactic to lure buyers into "parking their money" for inflation hedge.
30-12-14, 09:37
DC33_2008

Have been renting two bedder units to single expat in both CCR and Cityfringe. I suppose budget is the key criterion.

Quote:

Originally Posted by Luke65

Shoebox units will command good rental yield only in good locations. Generally those units are for the segment that want to live it up but had limited rental budget or individual who want a good location. Target profile are usually single expats. Those shoebox units out in neighbourhood competing with ECs and HDBs is almost a sales tactic to lure buyers into "parking their money" for inflation hedge.
30-12-14, 10:11
Luke65

Quote:

Originally Posted by DC33_2008

Have been renting two bedder units to single expat in both CCR and Cityfringe. I suppose budget is the key criterion.

2 bedder in CCR and Cityfringe is apple to apple and with the same tenant profile, budget is key and correlates to the article said about shoeboxes in different locations.
30-12-14, 10:29
Allthepies

"Those shoebox developments that are located away from the city or MRT stations, I think they will not be doing very well in terms of their rental demand"

Guess the key words are either in city or near MRT.

If in city and next to MRT will be the best: ) : )
30-12-14, 10:53
Ringo33

Quote:

Originally Posted by Allthepies

"Those shoebox developments that are located away from the city or MRT stations, I think they will not be doing very well in terms of their rental demand"

Guess the key words are either in city or near MRT.

If in city and next to MRT will be the best: ) : )

Price of apartment that is city and next to mrt also "best" :)
30-12-14, 11:45
teddybear

Don't think very budget people who want cheap in OCR will rent shoebox at high rental right? So, end up shoebox in OCR may have to rent damned cheap to compete with EC and HDB and family size private condos?

Quote:

Originally Posted by DC33_2008

Have been renting two bedder units to single expat in both CCR and Cityfringe. I suppose budget is the key criterion.
30-12-14, 11:55
DC33_2008

Quite likely to be the case in the next two years.

Quote:

Originally Posted by teddybear

Don't think very budget people who want cheap in OCR will rent shoebox at high rental right? So, end up shoebox in OCR may have to rent damned cheap to compete with EC and HDB and family size private condos?
30-12-14, 12:03
k00L

Suburban OCR MM Jgateway sold at 17xx psf will suffer most in times of falling rental demand
Mr Khaw wants single digit % fall in HDB resale prices. Suburban OCR MM prices will fall in tandem
Tharman also wants meaningful correction.
No upside for jgateway, but many downside risk - astute investors beware

Quote:

Originally Posted by Ringo33

Price of apartment that is city and next to mrt also "best" :)
30-12-14, 12:28
Kelonguni

Quote:

Originally Posted by teddybear

Don't think very budget people who want cheap in OCR will rent shoebox at high rental right? So, end up shoebox in OCR may have to rent damned cheap to compete with EC and HDB and family size private condos?

The most amazing thing is some of these OCR shoebox rents can indeed match or compare with HDB of similar sizes at similar locations. Still viable for many owners to price at those levels.

Unless it's OCR plus far from MRT plus far from any business hubs plus very high prices. Even for such HDBs, there is still some demand. Hope nobody's fall into such categories!
30-12-14, 13:45
teddybear

How much can owners rent out 4 room HDB flats in Jurong East? $2k per month?

How about 500 sqft MM rent out $2k per month but priced at $1700 psf or $850k? Any taker?
At $2k per month MM still need to pay for condo maintenance fees, higher property tax (than HDB flats), then pay income tax etc, wah, lose much money!

Quote:

Originally Posted by Kelonguni

The most amazing thing is some of these OCR shoebox rents can indeed match or compare with HDB of similar sizes at similar locations. Still viable for many owners to price at those levels.

Unless it's OCR plus far from MRT plus far from any business hubs plus very high prices. Even for such HDBs, there is still some demand. Hope nobody's fall into such categories!
30-12-14, 14:40
Kelonguni

Quote:

Originally Posted by teddybear

How much can owners rent out 4 room HDB flats in Jurong East? $2k per month?

How about 500 sqft MM rent out $2k per month but priced at $1700 psf or $850k? Any taker?
At $2k per month MM still need to pay for condo maintenance fees, higher property tax (than HDB flats), then pay income tax etc, wah, lose much money!

Not referring specifically to Jurong East HDB, but I think you might be out of touch with market rates. For 4rm flats in Jurong East and West, the median rental is $2,500.

http://www.hdb.gov.sg/fi10/fi10323p....t?OpenDocument

850K feels too high and risky if you ask me, but do note that most OCR MMs hover around 400 to 800K in price. For the loans involved, it is highly sustainable!