'Shoe boxes' here to stay... Really?!

The BT ran an article yesterday on “small-format apartments” developer Oxley Holdings. Below is an excerpt of the report:

The demand for “shoe-box” apartments is here to stay, says Ching Chiat Kwong, controlling shareholder and chief executive officer of Oxley Holdings.

“If you look at the way Singapore is developing – high economic growth, rising home-owning aspirations, more local and expatriate singles, young couples who prefer dogs rather than kids – you can see a very clear demand pattern emerging,” he noted. “There is a market for good-quality, affordable private homes in good locations.”

And it is a demand which Catalist-quoted Oxley hopes to capitalize on. The company specializes in building private apartments sized at around 350 – 400sqft, with a living room, one bedroom and fully fitted kitchenettes.

In just three months following its Oct 2010 listing, the company has sold out five of its “shoebox” apartment projects. Its Loft @Holland sold out within two hours of launch last week. This year it will launch at least nine more, and at least two commercial projects.

Mr Ching says the buyers of his apartments are not just singles and young couples, but also investors. “The rental yields from these properties tend to be good, so they make attractive investments as well,” he said.

Despite the property market curbs unveiled last week, Mr Ching does not appear to be overly concerned. “The key is affordability, and this becomes even more important under the new rules,” he said. “The projects we will launch this year are in prime locations, and more importantly, they are affordable. We will also launch several major commercial developments which are not impacted by the residential property curbs.”

Oxley’s business model is simple: Gear up to the maximum to acquire land, quickly launch units off the plans, maximize plot ratio, keep prices affordable, and keep project turnover short at around 7 – 9 months.

The company’s five projects launched last year raked in sales of some $260 million. Given its 40 to 50% margin, analysts reckon the profit from these could come up to over $100 million. This year it will bring to market almost $2.5 billion worth of projects.

These include nine apartment projects at prime urban and suburban locations like Holland Village (last week), Stevens Road, Devonshire, Telok Kurau, River Valey Road and Bradell Road.

After reading the BT article, the wife and I must certainly take our hats off to Mr Ching and Oxley Holdings for the achievements made over a short period of 2 years. And yes, “shoe boxes” looked to be here to stay. But the question is: for how long?

We wonder how many of those “singles, young couples and investors” that have bought into such shoebox units had based their decisions solely on the “affordability” argument without considering what living in an apartment of 350 – 400sqft is like. Yes, the showflats may look comfortable enough to live in, but that is before the furniture, clothes, shoes and whatever other earthly possessions that you may need space for in your home. And even with singles and young couples, such belongings do take up a fair bit of space!

And yes, there may be more young couples who prefer dogs rather than kids these days. But even dogs need their own space - you cannot possibly allow it to run around the lift lobby all the time or keep it in the stairwell.

But the wife and I certainly hoped that Mr Ching is right. This is especially for the sake of those who have bought and planned to live in such “small format” apartments, or investors hoping for high rental yields on their shoebox units …

.