In the midst of weakened supply, increasing unemployment and wage reduction problems, new sales for shoebox unit saw a decline in demand in the primary sector.
Data from property consulting company OrangeTee & Tie revealed that the amount of shoebox units sold, identified as units that are 506 sq ft and below, decreased from 16.9 percent during the same period last year to 12.1 percent over the first eight months of 2020, the BT report said.
On the other hand, the secondary sector reported an increase in demand for small units as the proportion of small, resale private homes increased from 6.2 percent previously to 6.8 percent.
Taken together, however, as a proportion of the overall number of non-landed private homes transacted, except executive condominiums (ECs), the proportion of shoebox homes in the primary and secondary markets still eased from 12 percent in January to August 2019 to 10 percent in January to August 2020, the BT study noted.
In absolute terms, from January to August 2020, the primary market saw 710 small units sold, down 25.6 percent year-on-year, while the resale market reported 272 small unit sales, down 11.1 percent, measured by PropNex. Due to the circuit breaker, which caused developers to put back releases and shutter their sales galleries, revenue decreased in Q2.
“As rates have not improved much, the slowdown, rising unemployment and wage cuts are likely to have adversely affected demand from some buyers in this group,” said Ong Teck Hui, JLL Singapore’s Senior Director of Analysis and Consultancy, as quoted by BT.
This comes when the pay cuts or reductions implemented by certain firms have impacted expatriate tenants on the back of the recession.
Ong expects the residential leasing demand to remain difficult until 2023, provided that the completed supply will be strong at an annual total of approximately 14,700 units from 2021 to 2023. The finished production is predicted to fall to 6,700 units by 2024.
As most buyers of shoebox units tend to be developers, Nicholas Mak, Head of Analysis and Consultancy at ERA Realty, expects the tougher leasing demand for small apartments to lower the appeal for such properties.
The slimmer pickings, as developers made fewer project releases during the first eight months of 2020, were also pointed out by analysts as another explanation for the lower market for smaller apartments.
Mak announced that 18 residential projects were launched by developers, offering a total of 4,189 units between January and August 2020, significantly smaller than the 40 residential projects, with a total of 11,540 units launched over the same period last year.
Wong Siew Ying, Head of Analysis and Content at PropNex, claims that the updated unit size requirements of the Urban Regeneration Authority, which stipulated a greater minimum average size for new private residential units in developments outside the central city, could also have crimped the shoebox unit availability.