Rentals for shoebox units on the rise

[princess_morbucks]

http://www.channelnewsasia.com/news/...medium=twitter

SINGAPORE: Spanning less than 538 square feet, shoebox units may be the smallest type of condominium units available.

However, such units are gaining popularity among property investors -- unit owners are getting better returns by renting out these units compared to rental yields from the larger condos.

The supply of condominiums are set to grow in coming months as more of such private homes are being built. Apart from catering to local demand, property investors are also targeting to rent out their units to foreigners working in Singapore.

However, recent policy changes are clamping down on foreigners being allowed to work here.

This potential mismatch between supply and demand has resulted in rentals heading southwards -- latest data released by SRX showed that rentals dropped 1.5 per cent from September, the largest decrease since June 2012.

But rentals of shoebox units seem to buck the trend -- data compiled by property consultancy Knight Frank showed that rentals of shoebox units located in the city (core central region) rose to S$8 psf from S$7.65 in the third quarter. In the city fringes (rest of central region), shoebox units rose to S$6.58 psf.

Only shoebox units in the suburbs (outside central region) saw rentals dipped slightly to S$5.91 psf down from S$5.93.

Market watchers note that Singapore's changing immigration policies have also changed the tenant profile. Previously, foreign professionals would bring families in to live with them, requiring more space. But now, more singles are coming in to work in Singapore instead."

Investment yields from shoebox units have been resilient. This averages about 4.1 per cent for shoebox units in the city and 4.8 per cent in the city fringes. Rental yields for the few shoebox units completed in the suburbs have also been the highest among the three regions, averaging 5.2 per cent.

Chua Yang Liang, the head of research at Jones Lang LaSalle, said: "Shoebox... are small sized, private and affordable. So they are in a way, directly comparable to HDB. But of course they are more private, more unique in terms of facilities."

According to Knight Frank, another 10,700 shoebox units -- expected to be completed by 2018 -- may drag down rental rates. Analysts said the removal of property-tax refund concession for vacant properties next year could also make owners lower rents.

Alan Cheong, head of research at Savills Singapore, said: "At the moment, shoebox rental yields are one percentage point higher than the conventional condominiums. But both shoeboxes and conventional condos -- the yields have been falling over time.

"That spread however, that premium for shoebox still exists and we expect the premium should maintain going forward."

Shoebox supply should remain limited in the medium term -- this is because of latest regulations in November 2012 which limit condominium average size to 70 square metres.

- CNA/ac

[Singleton]

Shoeboxes are here to stay.
Those premium ones at good locations have nothing to worry.
Those at least 500sfeet or so are definitely livable for young couples with/without a young child, or singles, esp when there are good facilities around.

The fear that has been discussed many times is whether the supply of suburban shoeboxes will outstrip demand.

No one can be sure whether that will happen and the extent of the problem if it happens. Time will tell

[DC33_2008]

There will be more competition when there is a downtrend on rental as expats may go for a slightly larger unit of 100-150 sqft more than a MM with the same rental in the same area.

[matrix0405]

Those who did not listen to chenghu and bought these inhumane units huat liao man. But tsunami of shoeboxes coming starting from this year.

[mermaid]

Those who did not listen to chenghu and bought these inhumane units huat liao man.

how to listen to chenghu sia, when they themselves built de shoebox even smaller den most pte mm

But tsunami of shoeboxes coming starting from this year.

care to elaborate wat type of tsunami is coming?

[thomastansb]

But MM can afford to lower their rental more than a big unit. But also depends on the quantum. Sometimes, a 350 sq ft is sold at 950k. It is pretty dangerous.

There will be more competition when there is a downtrend on rental as expats may go for a slightly larger unit of 100-150 sqft more than a MM with the same rental in the same area.

[mermaid]

But MM can afford to lower their rental more than a big unit. But also depends on the quantum. Sometimes, a 350 sq ft is sold at 950k. It is pretty dangerous.

I tink hor, as long as the location of yr mm is not lousy & u din overpay, basically it is quite safe be it how bad the rental mkt is.

[teddybear]

Not true lah. You have to know your target tenants...
Tenants who can afford private properties are mostly in middle-management and upper-management and should be old enough with families. You can't expect them to squeeze into MMs or 1 BR unit right?
Those young ones are quite limited in number, mostly work in finance industries and workplace in CBD, most probably will go for central MMs...

I tink hor, as long as the location of yr mm is not lousy & u din overpay, basically it is quite safe be it how bad the rental mkt is.

[mermaid]

Tenants who can afford private properties are mostly in middle-management and upper-management and should be old enough with families. You can't expect them to squeeze into MMs or 1 BR unit right?

in the 1st place, mm owners r never targeting on tenants wif family

Those young ones are quite limited in number,

the future intake of FTs & new PRs will be of higher calibre den in the past wor ...

[Patrickstar]

If space is a luxury in Singapore, I would just rent a big hdb flat near an mrt station rather than an MM for the same price if I were an expat. Those MMs far from mrt are in for trouble , but again if owners bought low , they can afford to rent lower.

[DC33_2008]

Expats are also quite smart to stretch their dollar. I believe it boils down to how desperate is the owner when it comes to rental. This will be tested in times of crisis.

But MM can afford to lower their rental more than a big unit. But also depends on the quantum. Sometimes, a 350 sq ft is sold at 950k. It is pretty dangerous.

[mermaid]

nowadays most expats package arrangement is rent their own accommodation or provided by coy huh?

Im tinking if the expat is some CEO/director/upper mgt etc ... rent a 3 rm hdb for the sake of larger space is a bit sia suay for the status leh ...