reporter2
26-10-22, 16:47
It’s live and let live for Singapore’s ever-shrinking 3-bedroom condos
Oct 21, 2022
THREE-BEDROOM non-landed homes, typically targeted at families, are getting smaller. Potential buyers hoping for government intervention had better vote with their wallets instead.
Data collated for The Business Times (BT) by PropertyGuru shows the median floor area of three-bedder condominium units falling over four decades.
The data sorted active listings by the year their Temporary Occupation Permits were obtained. Median floor areas were around 1,700-1,800 square feet (sq ft) in the 80s, then fell just below 1,500 sq ft in the 90s. Sizes went up from 2005 to 2010, but fell to around 1,000 sq ft from 2018.
https://i.imgur.com/fecq6EZ.png
Lee Nai Jia, PropertyGuru’s head of real estate intelligence, data and software solutions, attributed the decline in size to supply and demand pressures.
On the supply side, the costs of acquiring, holding and developing land have risen with competition. “Together with higher development costs and costs of sale, developers have needed to raise the unit price,” said Dr Lee.
On the demand side, prospective home buyers have been “surprisingly receptive”.
“With more efficient design, prospective buyers appear not to have minded the loss of area, as long as the prices met their budget,” he added.
Household appliances, technologies and furniture have become more compact to fit into smaller dwellings, noted Jonathan Denis-Jacob, director and head of advisory and consulting at Colliers.
“Evolving family structure and shrinking household sizes are also key factors,” he said. “With a growing number of couples remaining child-free or having only one child, or becoming empty-nesters earlier, many homeowners feel that they need less space.”
Singapore Department of Statistics figures show the average household size fell to 3.15 in 2021, from 3.53 in 2012. The average household size for those dwelling in condominiums fell to 3.11, from 3.48.
But Alan Cheong, executive director of research and consultancy at Savills, said three-bedder condo units are usually bought by public-housing upgraders with two school-going children and a helper. What they can pay for such homes will depend on how much they get for their flat.
“If land and construction costs for private apartments out-accelerate the resale price increase of HDB flats – the segment where upgrader demand is often found – then the only way to make the private unit affordable is to constrain its size,” said Cheong.
Indeed, the URA resale price index’s compounded annual growth rate (CAGR) was 2.3 per cent from Q2 2012 to Q3 2022. The HDB resale price index rose at 1.8 per cent per annum.
Should sizes be mandated?
Cheong sees the possibility of a “slowdown or halt” in the shrinking phenomenon, as HDB price increases have begun outpacing those of private homes. The HDB resale index showed a CAGR of 11.3 per cent from Q2 2020 to Q3 2022, against the URA index’s CAGR of 9.5 per cent.
But beyond market forces, could the government be expected to intervene?
The Urban Redevelopment Authority (URA) on Tues (Oct 18) released a circular stating that from Jan 18, 2023, all new developments in the Central Area must ensure at least 20 per cent of dwelling units have a nett internal area of at least 70 sq m. This size, it said, is considered “reasonable” for small families, taking into account the tighter space constraints of the Central Area.
It appears unlikely that the authorities will go further.
BT had queried URA last week if it would mandate minimum sizes for three-bedroom condo units. In response, URA said it already has guidelines on the maximum allowable number of private homes in non-landed developments outside the Central Area, aimed at moderating the number of “shoebox” units. Such units are 50 sq m (538 sq ft) or smaller.
A URA spokesperson said: “We balance this with giving developers the flexibility to build units of varying sizes to cater to market demand. This is why we do not prescribe the sizes for the different unit types within a development, provided they follow the broader set of measures that are already in place.”
Analysts BT spoke to agree that the authorities should not prescribe minimum sizes, but allow developers to provide options for different buyers. Should developers push past acceptable limits, the market will be the judge.
“If the yearning to live in private property is strong enough, families would make adjustments to their living conditions,” said Cheong of Savills. “The helper could live in the study or perhaps the living room, like what some are doing in HDB flats.”
Lam Chern Woon, head of research and consulting at Edmund Tie, said anecdotal evidence suggests 900 sq ft is still acceptable for a two-generation family.
While unit sizes are declining, effective living spaces for each household member may not shrink as much in efficient layouts.
And not all bedrooms will fit a queen-sized bed, said Lam.
How small can they go?
Savills’ Cheong thinks three-bedder condo units probably won’t go below 850 sq ft for now.
“Unlike in Hong Kong, people here are psychologically used to a certain size for a traditionally laid out apartment,” said Cheong. If units are too small, there is no telling if buyers would bite; that risk may be too high for developers to stomach, he said.
Buyers are unlikely to accept smaller units unless there is a housing shortage or a speculative fever, or they are new residents who have adapted to smaller apartment sizes elsewhere, he suggested.
Edmund Tie’s Lam said guidelines to cap the number of dwelling units in private non-landed developments outside the Central Area already require most condos to have units averaging 85 sq m or 915 sq ft.
“It is unfathomable to imagine that the bulk of three-bedroom units in the future would be significantly below 900 sq ft,” he said.
Market forces will also play a part, said PropertyGuru’s Dr Lee.
“The pandemic is creating a shift in demand for more space, due to the introduction of work-from-home arrangements,” he noted. “However, it remains to be seen whether the increase in demand is permanent.”
https://www.businesstimes.com.sg/real-estate/its-live-and-let-live-for-singapores-ever-shrinking-3-bedroom-condos
Oct 21, 2022
THREE-BEDROOM non-landed homes, typically targeted at families, are getting smaller. Potential buyers hoping for government intervention had better vote with their wallets instead.
Data collated for The Business Times (BT) by PropertyGuru shows the median floor area of three-bedder condominium units falling over four decades.
The data sorted active listings by the year their Temporary Occupation Permits were obtained. Median floor areas were around 1,700-1,800 square feet (sq ft) in the 80s, then fell just below 1,500 sq ft in the 90s. Sizes went up from 2005 to 2010, but fell to around 1,000 sq ft from 2018.
https://i.imgur.com/fecq6EZ.png
Lee Nai Jia, PropertyGuru’s head of real estate intelligence, data and software solutions, attributed the decline in size to supply and demand pressures.
On the supply side, the costs of acquiring, holding and developing land have risen with competition. “Together with higher development costs and costs of sale, developers have needed to raise the unit price,” said Dr Lee.
On the demand side, prospective home buyers have been “surprisingly receptive”.
“With more efficient design, prospective buyers appear not to have minded the loss of area, as long as the prices met their budget,” he added.
Household appliances, technologies and furniture have become more compact to fit into smaller dwellings, noted Jonathan Denis-Jacob, director and head of advisory and consulting at Colliers.
“Evolving family structure and shrinking household sizes are also key factors,” he said. “With a growing number of couples remaining child-free or having only one child, or becoming empty-nesters earlier, many homeowners feel that they need less space.”
Singapore Department of Statistics figures show the average household size fell to 3.15 in 2021, from 3.53 in 2012. The average household size for those dwelling in condominiums fell to 3.11, from 3.48.
But Alan Cheong, executive director of research and consultancy at Savills, said three-bedder condo units are usually bought by public-housing upgraders with two school-going children and a helper. What they can pay for such homes will depend on how much they get for their flat.
“If land and construction costs for private apartments out-accelerate the resale price increase of HDB flats – the segment where upgrader demand is often found – then the only way to make the private unit affordable is to constrain its size,” said Cheong.
Indeed, the URA resale price index’s compounded annual growth rate (CAGR) was 2.3 per cent from Q2 2012 to Q3 2022. The HDB resale price index rose at 1.8 per cent per annum.
Should sizes be mandated?
Cheong sees the possibility of a “slowdown or halt” in the shrinking phenomenon, as HDB price increases have begun outpacing those of private homes. The HDB resale index showed a CAGR of 11.3 per cent from Q2 2020 to Q3 2022, against the URA index’s CAGR of 9.5 per cent.
But beyond market forces, could the government be expected to intervene?
The Urban Redevelopment Authority (URA) on Tues (Oct 18) released a circular stating that from Jan 18, 2023, all new developments in the Central Area must ensure at least 20 per cent of dwelling units have a nett internal area of at least 70 sq m. This size, it said, is considered “reasonable” for small families, taking into account the tighter space constraints of the Central Area.
It appears unlikely that the authorities will go further.
BT had queried URA last week if it would mandate minimum sizes for three-bedroom condo units. In response, URA said it already has guidelines on the maximum allowable number of private homes in non-landed developments outside the Central Area, aimed at moderating the number of “shoebox” units. Such units are 50 sq m (538 sq ft) or smaller.
A URA spokesperson said: “We balance this with giving developers the flexibility to build units of varying sizes to cater to market demand. This is why we do not prescribe the sizes for the different unit types within a development, provided they follow the broader set of measures that are already in place.”
Analysts BT spoke to agree that the authorities should not prescribe minimum sizes, but allow developers to provide options for different buyers. Should developers push past acceptable limits, the market will be the judge.
“If the yearning to live in private property is strong enough, families would make adjustments to their living conditions,” said Cheong of Savills. “The helper could live in the study or perhaps the living room, like what some are doing in HDB flats.”
Lam Chern Woon, head of research and consulting at Edmund Tie, said anecdotal evidence suggests 900 sq ft is still acceptable for a two-generation family.
While unit sizes are declining, effective living spaces for each household member may not shrink as much in efficient layouts.
And not all bedrooms will fit a queen-sized bed, said Lam.
How small can they go?
Savills’ Cheong thinks three-bedder condo units probably won’t go below 850 sq ft for now.
“Unlike in Hong Kong, people here are psychologically used to a certain size for a traditionally laid out apartment,” said Cheong. If units are too small, there is no telling if buyers would bite; that risk may be too high for developers to stomach, he said.
Buyers are unlikely to accept smaller units unless there is a housing shortage or a speculative fever, or they are new residents who have adapted to smaller apartment sizes elsewhere, he suggested.
Edmund Tie’s Lam said guidelines to cap the number of dwelling units in private non-landed developments outside the Central Area already require most condos to have units averaging 85 sq m or 915 sq ft.
“It is unfathomable to imagine that the bulk of three-bedroom units in the future would be significantly below 900 sq ft,” he said.
Market forces will also play a part, said PropertyGuru’s Dr Lee.
“The pandemic is creating a shift in demand for more space, due to the introduction of work-from-home arrangements,” he noted. “However, it remains to be seen whether the increase in demand is permanent.”
https://www.businesstimes.com.sg/real-estate/its-live-and-let-live-for-singapores-ever-shrinking-3-bedroom-condos