Published September 14, 2009

Smaller homes take lion's share of sales

Buyers continue to be price sensitive


(SINGAPORE) Home-seekers have gotten hungrier for apartments in recent months but have yet to work up a hearty appetite for large units.

Across many property launches, studio apartments and two-bedders remain most popular, reflecting continued price sensitivity on the buyers' part. They are generally 'still not as ambitious', says DMG & Partners property analyst Brandon Lee.

At NTUC Choice Homes' Trevista in Toa Payoh where 550 units have been launched, the majority of units left are three and four-bedders. Many buyers went straight for the two-bedroom units when the project's preview began some two weeks ago.

GuocoLand saw the same trend when it launched Sophia Residence in the Dhoby Ghaut area. 'All one and two-bedders were snapped up as soon as they were launched,' says a GuocoLand spokesman. The project also has three and four-bedroom units.

Anecdotal evidence also points to a preference for smaller homes at projects such as Viva and Ascentia Sky. In another instance, the 70-unit Airstream at St Michael's Road - where most units measured 625 sq ft in size or smaller - sold out last month.

Aiding the trend, some developers caught sight of homeseekers' shrinking pockets as the downturn came and reconfigured their projects to offer a bigger number of smaller units.

Although prices for smaller homes tend to be higher on a per square foot (psf) basis, they still work out to be lower in absolute terms. At Trevista, for example, prices of 4-bedders start from $850 psf or $1.448 million. But those of 2-bedders start from $880 psf or $770,000, drawing buyers wary of making huge financial commitments.

As Savills Residential director Phylicia Ang notes, many buyers in today's market are first-time private home owners or HDB upgraders who have an 'affordability threshold'.

Property consultancy DTZ's recent analysis of caveats proves this further - as much as 78 per cent of private residential transactions in Q2 2009 involved apartments costing less than $1.5 million.

It has become more challenging to market larger units in such an environment. An agent who declined to be named says that penthouses are particularly hard to sell when most budgets stay below $1.5 million. His strategy is to promote them to foreign investors from countries such as Indonesia.

Nonetheless, the market for larger apartments is far from dead. 'Seasoned' buyers or investors would still consider bigger units, says Ms Ang.

Keppel Land's Madison Residences has attracted its share of buyers and is 65 per cent sold. The project comprises only three and four-bedders with sizes ranging from 1,464 sq ft to 4,047 sq ft, at an average price of about $1,700 psf on the interest absorption scheme (2 per cent more than the normal progressive payment scheme).

Keppel Land International general manager for marketing Albert Foo attributes this to the site's prime freehold address and proximity to top schools and the upcoming Stevens MRT.

Unique features may also make larger units more attractive. GuocoLand says that four-bedroom units at Sophia Residence are 'selling very well' because they can be rented out in two components - as studios and three-bedders with their own entrances.

Some expect larger units to gain favour in the next few months.

'With the recovery of the economies, we could see more funds and institutional buyers forming the next wave of demand for the larger units in prime locations,' says the GuocoLand spokesman.

DMG & Partners' Mr Lee also expects more foreigners to enter the local property market as economies improve and the integrated resorts open, driving greater demand for larger units.