The government last week said it’s concerned that shoebox apartments are mushrooming in the city-state as private home sales surged to a three-year high with record purchases of units that are smaller than 50 square meters (538 square feet).
“I am dead against shoebox developments,” Liew said in an interview at the downtown Singapore headquarters of Southeast Asia’s biggest developer. “The government should intervene. Singapore’s land is very precious and you are wasting your scarce resources” by building shoebox apartments.
The island-state’s population growth, scarce land and surging property values have prompted developers to shrink apartment space. Home prices surged to a record at the end of 2011 in a city that’s about half the size of Los Angeles.
The government may introduce measures to regulate the sale of shoebox apartments after a record number were sold in the first quarter, Khaw Boon Wan, Singapore’s National Development minister, said in Parliament on May 14.
Developers sold 1,764 shoebox units in the first quarter, or 27 percent of all home sales, the most since the Urban Redevelopment Authority began collating the data in 2007. Apartments that cost less than S$750,000 ($587,000) made up 42 percent of new home sales in the first quarter, up from 25 percent in the previous three months, the data showed.
“It’s almost inhuman, it’s not good for the welfare of the family to feel that constrained,” said Liew, 65, who grew up in a one-bedroom apartment with nine people and often slept along the corridor.
At CapitaLand’s latest project, the 509-unit apartment in a central Singapore suburb designed by architect Moshe Safdie, the smallest homes are one-bedroom units measuring 710 square feet. Liew said Singapore should impose a minimum size for homes.
Singapore developers built smaller apartments in the first quarter, with median size of homes shrinking 24 percent to 667 square feet, according to CBRE Group Inc. Median prices for the period slid 18 percent to S$786,340, it said.
The government has been attempting to rein in prices since 2009 when it barred interest-only loans for some projects and stopped allowing developers to absorb interest payments for apartments still being built. In December, it imposed additional taxes of as much as 10 percent on home purchases.
CapitaLand climbed 1.2 percent to S$2.46 at the close in Singapore, the third-best performer on the city’s Straits Times Index. (FSSTI) The stock has risen 12 percent since the start of the year, twice the 5 percent increase in the benchmark gauge.
Government controls haven’t slowed housing transactions in Singapore, driven by suburban projects, Liew said. He reiterated the company’s aim to sell as many as 1,000 homes annually over the next two to three years.
“We don’t think we have an issue with” the target, he said. “If you’re aiming for the high-end, central core areas like Orchard Road, the numbers will not be so optimistic. If you’re selling to the mass market, then the demand is still there.”
The next set of curbs may be targeted at the smaller apartments, said Wilson Liew, Singapore-based analyst at Maybank Kim Eng Holdings Ltd.
“The Singapore government will first address the ‘shoebox unit’ phenomenon,” he said. “More measures are on the way.”
Limiting Shoebox Homes
Singapore may limit the number of shoebox units to 10 percent of each development, especially for projects in the suburbs, he said. The government could also set the minimum size for apartments at 50 square meters to ensure the quality of life isn’t compromised, the analyst said.
The trend of shoebox units may not be unique to the city-state, said Pratik Burman Ray, an analyst at HSBC Holdings Plc in Singapore. Philippine developers have built homes smaller than 20 square meters, while those in Thailand and Indonesia are less than 35 square meters, he said. In Hong Kong, apartments smaller than 500 square feet house two or three people, he said.
“I wonder if this phenomenon is Singapore specific or a shift in buyer preference, and then the question is should it be regulated at all,” Ray said. “What’s needed is greater transparency to protect home buyers, which is perhaps more critical.”
Developers will be required to provide more information including floor plans that reflect the actual size of the apartments, Khaw said. Model homes should also depict the units “accurately,” he said, adding that the changes will be introduced in the second half when the law is passed.
CapitaLand is lobbying against the shoebox units, said Liew, citing a recent visit to a 400-square-foot unit in Hong Kong.
“I used to joke that when I sat on the sofa, I don’t need the remote control to switch on the TV, I use my toes,” he said. “If you build 200 square feet, 300 square feet for a family of two or three, you might as well stay in a box. There needs to be some degree of comfort level.”
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