http://www.straitstimes.com/archive/...eport-20140428
Condo units shrinking: Report
Developers trim unit sizes to keep prices affordable in wake of lending curbs
Published on Apr 28, 2014 12:57 AM
By Cheryl Ong
SIZES of condominium units here are shrinking as developers battle to keep new project prices affordable in ever tougher market conditions, a new study by property consultancy Knight Frank has found.
A string of cooling measures and stricter lending guidelines have made it harder for home hunters to finance new purchases.
The smaller units being built by developers mean lower overall prices which fit with buyers' shrinking budgets, Knight Frank noted.
The study looked at suburban condominiums launched in the past year and the impact of the Total Debt Servicing Ratio (TDSR) framework introduced last June.
"It appears that there is a reduction in the variety of size ranges since the implementation of the TDSR," said Ms Alice Tan, research head at Knight Frank.
"Developers are seeking to price their product right to achieve the dual objectives of moving sales and maintaining their overall target average prices of new project launches."
Knight Frank analysed 17 condos with at least 200 units, comparing those which were launched before the introduction of TDSR and those launched subsequently. It found that the size of the largest units in each condo type had shrunk. Five-bedroom units shrank the most with the average size of the largest units in the category falling 22.9 per cent, from 2,035 sq ft to 1,569 sq ft.
The smallest five-bedders also shrank 6.3 per cent from an average of 1,605 sq ft to 1,505 sq ft in the one-year period.
Two-bedders showed the next most significant drop. The largest units shrank 11.2 per cent from 973 sq ft to 864 sq ft in the same period, while the smallest units showed a slighter 0.7 per cent dip, shrinking from 703 sq ft to 698 sq ft.
Mr Lim Yew Soon, managing director of developer EL Development, added that smaller units were being built because the costs of land and construction have crept up.
However, not all unit types were built smaller. Though the largest three- and four-bedders in a condo had shrunk by an average of 4.2 per cent, the sizes of the smallest units in both configurations increased instead.
Three-bedders grew from 947 sq ft to 998 sq ft, while four-bedders increased from 1,229 sq ft to 1,275 sq ft.
Home buyers looking for a bigger home - but who are not able to afford a five-bedder - can now look to these slightly larger units as an alternative, Ms Tan noted.
Knight Frank also pointed out that developers were standardising the sizes of one-bedroom units following the TDSR, as the difference in average sizes of the largest and smallest one-bedders had shrunk.
Before the borrowing rules kicked in, one- bedders ranged from 477 sq ft to 584 sq ft on average - a gap of 107 sq ft. This difference shrank to 63 sq ft, as one-bedders ranged from an average of 478 sq ft to 541 sq ft.
"(This) reflects developers' inclination towards creating more optimally sized units in order to achieve ideal price levels for more price-sensitive home buyers," said Ms Tan.
At Frasers Centrepoint's RiverTrees Residences in Sengkang, for instance, two-bedders, which range from 570 sq ft to 710 sq ft, sold the best when the condo was launched in February. Prices of the two-bedroom units start from $618,000.
But there is a limit to how much developers can reduce unit sizes, as the Urban Redevelopment Authority has restricted the average sizes of condo units outside the city centre to a minimum of about 753 sq ft, Knight Frank noted.
Mr Luke Chan, 73, who has been shopping for a unit with his family, said he has noticed that "each apartment is now smaller than before" when he visits show-flats.
"If you're a young family, a 1,000 sq ft three-bedder for four or five can be quite tight. It's so small that you might not feel comfortable relaxing at home."
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