Thursday, January 6, 2011
The "shoebox" price euphoria - Representative or skewed?
Below is a rather interesting article published in the ST today.
The answer will most certainly depend on whether you ask a potential buyer or seller, but the wife and I have seen enough "real-life" examples of how a single transaction can skewed opinions/expectations about the price of units within a development.
If you have been following our blog, you will know what our stand on these "shoebox flats" is. The rental may be up 11% in the first nine-months of 2010 while the absolute value of such units may be easier on the pocket, but the rental market looks set to soften with the number of new flats TOP-ing next year. And once all these "mickey mouse" units come onto the market in the next 2 - 3 years, one has better pray that there be enough takers (middle-income singles, DINKs, rich parents who want to kick their child out of the house...etc etc) for such tiny units. One might argue that the "expats market" will still exist as Singapore continues to import foreign talents. However, will many of these foreigners be interested in renting/buying a flat that is less than 500sqft in size? THAT is the million-dollar question... okay, make that slightly less than a million (given that most of the shoebox flats are supposedly priced below the psychological $1 million mark).
It may already be too late when you realized that you cannot get sufficient rental to cover your monthly loan repayment after paying sky-high psf price for that shoebox unit, or worse... cannot rent, cannot sell.
Let's just hope that we are wrong, else there'll be an absolute blood-bath come 2012 -2013...
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2 comments:
I agree somewhat that there maybe an oversupply of studio apartment in the near future which might affect their rental. However I think you also have to consider the fact that these "mickeymouse" apartments will not only compete within themselves but also possibly with bigger apartments for tenants. You might see expats possibly downgrading sizewise to a smaller more affordable apartment.
So it is possible that the main factor deciding whether or not these studio apartments will bring good return will simply depends on whether there are enough housing supply to go around for the market. If there IS an oversupply after these MM comes into the market, it will not just be the studio apartments returns being affected negatively but also the bigger condo units as well
Hope you get my point :)
Hi jansenboy: We really cannot see the MM units competing in the same playing field as the bigger condo units. The two unit types have traditionally catered to different buyer groups and we foresee that this will continue to be the case.
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