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SG Sales of shoebox units most active in suburbs

Property Here - Friday, November 15, 2013

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With its lower price quantum and higher rental yields, shoebox units or units that are 50 sq m and below are gaining popularity particularly in the Outside Central Region (OCR), according to a Knight Frank report.

During the first nine months of 2013, the OCR accounted for 53.3 percent of new sale shoebox transactions. 

The report noted that this proportion “spiked to 78.7 percent in Q3 2013 due to strong sales at J Gateway, which had 223 caveats lodged for shoebox units in the quarter”. 

The OCR also registered the highest increase in prices, with the average psf price rising 10.7 percent to S$1,523 psf. Prices of high-end shoebox units in the Core Central Region (CCR) climbed by 2.2 percent to S$2,322 psf, while mid-tier shoebox units in the Rest of Central Region (RCR) rose 8.8 percent to S$1,640 psf.

The rise in prices has narrowed the price gaps between the OCR and RCR/CCR segments in the last two years. Knight Frank attributed the closing gap to the surge of new launches in the OCR arising from the supply influx under the Government Land Sales (GLS) Programme.

Meanwhile, shoebox units command higher investment yields compared to the overall leasing market. Shoebox properties in the CCR, RCR and OCR had an average yield of 4.1 percent, 4.8 percent and 5.2 percent respectively, while non-landed private properties in the high-end, mid-tier and mass market segments had an average yield of 3.0 percent, 3.6 percent and 3.7 percent respectively in Q3. 

Moving forward, demand for shoebox units is expected to remain stable over the next three to four quarters as small-sized apartments become the norm.

The investment appeal of shoebox properties is also expected to remain and grow over time, with those near transport nodes and the city centre receiving more interest. Yields are expected to hold at 4.2 to 4.5 percent in the CCR, 4.7 to 5.2 percent in the RCR and 5.0 to 5.3 percent in the OCR.