Published September 05, 2012

Govt acts to contain rash of shoebox units

New guidelines to ensure that their proportion stays within bounds in
suburban areas

By Kalpana Rashiwala

[SINGAPORE] The Urban Redevelopment Authority (URA) has acted to manage the proportion of shoebox units in suburban areas. It is seeking to cap the number of homes in new developments, based on an average unit size of 70 square metres gross floor area.

At the same time, Singapore's planning authority is giving flexibility to developers to include some smaller housing units in their projects to cater to diverse demographic groups and lifestyles. Notably, URA has not stipulated a minimum apartment size.

National Development Minister Khaw Boon Wan said in his blog yesterday: "Developers are still free to build small apartments if there is demand, but there must be a good mixture of large and small units, in order to meet the URA guidelines."

URA's announcement was generally welcomed in most quarters, though some players say it could dent land prices for smaller en bloc sale sites as developers typically tend to mint a higher proportion of small units on such sites.

There have been concerns about a potential oversupply of shoebox units. "There's a risk, especially during a long-drawn period of economic weakness, where neighborhoods with small-sized apartments could deteriorate in terms of social quality. And the sense of good residential space and homeliness might be lost," says Ku Swee Yong, CEO of International Property Advisor.

From Nov 4, the maximum number of units in non-landed private housing projects outside the Central Area will be capped based on an average area of 70 sq m. This also applies to the residential component of mixed-use developments.

Central Area includes locations such as Raffles Place, Tanjong Pagar, Singapore River, Marina Bay, Orchard and Newton, as well as places such as Beach Road, Ophir Road, Jalan Sultan, Syed Alwi Road, Tekka Lane and Outram Road.

The formula used is identical to the one URA introduced last November for all new condo and flat projects in residential areas with 1.4 plot ratio islandwide. Similarly, a guideline on the maximum number of homes based on an average size of 100 sq m, introduced last year in Telok Kurau Estate, will be extended to Kovan and Joo Chiat/Jalan Eunos estates from Nov 4.

URA's spokesman said: "The new guidelines are intended to manage the proportion of shoebox units within a development and ensure that the supply of housing units can cater to the diverse needs of all segments of the market." In its release, the authority also noted: "Smaller sized units can still be developed under these guidelines, but at a more moderate proportion and pace. The new guidelines are applied only . . . outside . . . the Central Area, where housing tends to cater mainly to larger households and families."

URA also said: "The situation that we should avoid is for shoebox units to form a disproportionately large portion of the housing stock in Singapore. Increasingly we are seeing some new housing developments consisting predominantly of shoebox units - as high as 50 to 80 per cent.

A large concentration of such developments can strain the local road infrastructure as the number of housing units ends up much higher than what was originally planned for." For example, 80 per cent of the units at Nottinghill Suites at Toh Tuck Road are 50 sq m or less.

According to URA, the stock of completed shoebox units (up to 50 sq m) will increase more than four-fold from about 2,400 units at end-2011 to about 11,000 units by end-2015. There is concern that some may be left empty if there is insufficient demand. Also while rental yields of shoebox units are relatively attractive now, the trend may not be sustained as more shoebox supply is completed. Shoebox units also tend to inject more cars in a neighbourhood than planned.

The Real Estate Developers Association of Singapore said it shares "the Government's continual effort to maintain quality living environment in Singapore".

SAA Architects executive director Toh Kok Kin, commenting on the exclusion of the Central Area from the controls on the maximum number of units, said: "It makes sense to exclude inner-city living as we're trying to revitalise the city. Given higher per square foot prices in the city area, smaller units are more affordable."

Knight Frank chairman Tan Tiong Cheng said that the guidelines "put an end to uncertainty that some developers face on the number of homes they can build when they buy land, especially private land including en bloc sales". However, some players believe the measures could affect smaller en bloc sale sites. "Smaller sites are typically sought after by smaller developers who tend to build a higher proportion of shoebox units in their projects. Owners of such sites could see some erosion in their land values and collective sale premiums, thereby requiring their price expectations to be re-calibrated," says Karamjit Singh, regional director and head, capital markets and residential, Singapore, at Jones Lang LaSalle.