TREND OF SHOEBOX APARTMENTS IN SINGAPORE

Abstract

The objective of this study is to investigate the uprising shoebox apartment trend in Singapore. Shoebox apartments are typically housing units with reduced gross floor area (GFA). It is first officially labeled and launched into the Singapore market in 2006. In the current market, there are officially 150 projects with close to 2,000 transactions being done within a year. This reflects the growing acceptance and popularity of such shoebox apartments in the private housing sub-market.

The analysis first examines the economic factors that contribute to the overall demand. These factors include issues of prices, rental yields and affordability that are crucial determinants towards investing into shoebox apartments in Singapore.

Social factors are also examined, mainly focusing on changes in population trends. In recent years, an increased number of foreigners and permanent residents are sinking their roots in Singapore. This led to an increase in the total population in Singapore even when the fertility rates are declining. In addition, formation of smaller family household have been observed to increase due to various reasons such as a change in attitude towards marriage, and less focus being placed on family values. All these calls for the need for more suitable housing for the diversify groups of people residing in Singapore.

The relationship between economics and demand for shoebox apartments was examined in depth. Price and rental analysis was done between various housing options available in the Singapore housing market. Transactional data are obtained from the real estate database of Singapore (REALIS) from the 3rd quarter period to 4th quarter of 2010. Both analyses provided promising returns for shoebox apartments.

From an affordability angle, both short-run and long-run studies are being constructed to determine how affordable shoebox apartments are to potential buyers in the market. Initial affordability covers the downpayment, legal and stamp duties fees that are requirements for buyers to pay within the stipulated period set by URA guidelines. Moreover, debt service ratios calculate the affordability of buyers with different levels of income. The studies have shown that shoebox apartments are generally affordable. This has attracted more buyers into the private housing market.

All in all, there is potential for greater penetration of shoebox apartments in the Singapore market. Given the positive market outlook, the shoebox apartment trend is likely to continue in Singapore. However, potential pitfalls of liveability still need to be thoroughly investigated to ensure the concept’s viability in the long-run.