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    Mar 26, 2014

    Sub-800 sq ft units' share of home sales at record high

    SMALL units of up to 800 sq ft made up a record proportion, 47.6 per cent, of non-landed private homes sold by developers last year. This was up from 43.4 per cent a year earlier.

    A caveats analysis by CBRE found that the over 40 per cent share started in 2011.

    "This is a function of supply," said CBRE Research associate director Desmond Sim, "as developers have been reducing unit sizes to keep the absolute price quantum affordable to buyers especially investors, who have been slapped with successively tighter loan limits in recent years."

    The spike in small units' share, however, is not due to the so-called shoebox apartments (below 500 sq ft) but to 500-800 sq ft units.

    The property consulting group's analysis - which excluded executive condos, a public-private housing hybrid - found that 500-800 sq ft units' proportion has increased steadily to 34.4 per cent last year, from 29.7 per cent in 2012, 25.9 per cent in 2011 and 18.9 per cent in 2010.

    This reflects the trend of developers minting more compact two- and three-bedders in a bid to keep absolute price quantums within buyers' reach.

    Meanwhile, the share of shoebox units dropped to 13.2 per cent last year, from 13.8 per cent in 2012 and the high of 15.1 per cent in 2011.

    Analysts attribute this partly to an Urban Redevelopment Authority cap, effective Nov 4, 2012, on the number of homes in new non-landed residential projects Outside the Central Area, based on an average unit size of 70 sq m (753.47 sq ft) gross floor area.

    The growing share of small homes in the past few years is also reflected in a contraction in median unit sizes - the figure has shrunk 30.6 per cent to 829 sq ft last year from 1,195 sq ft in 2009. Over the same period, the median per square foot price increased 47.2 per cent to $1,354 from $920, while the median lump-sum unit price rose 12 per cent to $1.08 million from $965,000.

    Market watchers note that the end of the global financial crisis was marked by an era of unprecedented money-printing by governments in many parts of the world, creating a surge in global liquidity and low interest rates.

    This has resulted in investors snapping up properties in many markets - including Singapore, driving up suburban condo prices.

    To counter this, some developers began building a higher ratio of small units to keep lump-sum prices affordable and widen the pool of buyers.

    Developers have also found that small units help investors overcome the lower loan-to-value limits introduced for those with at least one existing home mortgage and seeking to buy more residential properties.

    And with the Total Debt Servicing Ratio framework rolled out last June, financial institutions are required, when granting property loans to individuals, to cap a borrower's total monthly debt obligations to no more than 60 per cent of gross monthly income.

    "Thus, it has become increasingly difficult for potential home buyers to obtain a loan, if they do not have enough cash," noted Mr Sim.

    Developers told BT that in 2009, after the global crisis, they were building two-bedroom apartments of typically around 900-950 sq ft. This has shrunk to 700-750 sq ft compact two-bedders today.