SHOEBOX UNITS: PRICE AND PLANNING IMPLICATIONS

Abstract

Shoebox units, generally defined as units smaller than 500 sqft or 50sqm, have existed in Singapore since 1972 and are primarily found in the Central or Central fringe regions. With escalating house prices since the global financial crisis, shoebox units have proliferated given their low absolute pricing. This study investigates the price impact of shoebox units and their implications for land use planning in Singapore. Anecdotal evidence shows that shoebox units are not only priced at a premium on a psf basis but are also launched and sold in the early part of the sales period of residential projects. Thus, we hypothesize that shoebox units are price leaders. Using data from Real Estate Information System (REALIS), Granger Causality Tests support the hypothesis that the prices of shoebox units lead and granger-cause the prices of bigger units. Further, shoebox units increase the price volatility of bigger units. Hence, the strategy of developers that launch and sell smaller units first so as to benchmark a higher price for other bigger units has been successful. From interviews with the URA, smaller units do impact land use. An excessive number of shoebox units strains the existing infrastructure and may impair living conditions. To address their negative impacts on the environment and limit the negative externalities, several measures were implemented to curb the proliferation of shoebox units. However, these measures did not solve the problems fully in some areas as high traffic volume is also caused by commercial uses in the area. As the shoebox phenomenon is gathering momentum in non-residential uses, similar implications for prices and amenity value are plausible and policies should anticipate these problems before hand.