{"id":25627,"date":"2019-05-05T11:50:53","date_gmt":"2019-05-05T03:50:53","guid":{"rendered":"https:\/\/www.99.co\/blog\/singapore\/?p=25627"},"modified":"2022-06-13T17:06:48","modified_gmt":"2022-06-13T09:06:48","slug":"5-reasons-shoebox-units-are-gaining-popularity-again","status":"publish","type":"post","link":"https:\/\/www.99.co\/singapore\/insider\/5-reasons-shoebox-units-are-gaining-popularity-again\/","title":{"rendered":"5 Reasons Shoebox Units are Gaining Popularity Again"},"content":{"rendered":"<div id=\"bsf_rt_marker\"><\/div><p>Shoebox units (aka the Property Investor Starter Kit) are much maligned by old-school investors. Too small for families, too cost per square foot, too hard to offload. But if so, why is everyone so interested in these small houses again?<\/p>\n<h3>Reason#1: Over the long term, shoebox units have performed better than the overall condo market<\/h3>\n<p>Detractors may be surprised to learn that, in terms of gains, the &#8220;hard to sell&#8221; shoebox units outperform the condo market as a whole:<\/p>\n<p><img decoding=\"async\" class=\"alignnone size-full wp-image-25631 aligncenter\" src=\"https:\/\/www.99.co\/singapore\/insider\/wp-content\/uploads\/2019\/04\/shoebox.png\" alt=\"shoebox units vs condos\" width=\"595\" height=\"536\"><\/p>\n<p>We looked at the price appreciation of shoebox units (defined as any unit of 500 square feet or smaller), versus the overall condo market.<\/p>\n<p>Average prices for shoebox units were around $276,000 in 2014, rising to around $748,300 in 2019. This is an increase of about 171 per cent. For the overall condo market, prices rose from an average of about $834,650 in 2004, to about $1.587 million in 2019. An increase of just over 90 per cent, lagging significantly behind shoebox units.<\/p>\n<figure id=\"attachment_17458\" aria-describedby=\"caption-attachment-17458\" style=\"width: 650px\" class=\"wp-caption aligncenter\"><img decoding=\"async\" class=\"wp-image-17458 \" src=\"https:\/\/www.99.co\/singapore\/insider\/wp-content\/uploads\/2017\/09\/tiny-house-shoebox-unit.jpg\" alt=\"5 Reasons Shoebox Units are Gaining Popularity Again\" width=\"650\" height=\"374\"><figcaption id=\"caption-attachment-17458\" class=\"wp-caption-text\">Shoebox units have been performing better than the overall condo market.<\/figcaption><\/figure>\n<p>Last year, a report from Knight Frank showed that owners who sold their shoebox units saw an average capital gain of 11.5 per cent, whereas larger counterparts saw an average gain of just 10.6 per cent. Rental yields were unsurprisingly higher for shoebox units as well (due to their low overall cost), and averaged 3.5 per cent, or four per cent in the north of Singapore.<\/p>\n<p>The rental yield for most residential properties is between two to three per cent.<\/p>\n<h3><strong>Reason #2: Recent cooling measures make shoeboxes an affordable alternative<\/strong><\/h3>\n<p>Under the cooling measures in July, the maximum <a href=\"https:\/\/www.99.co\/singapore\/insider\/property-jargon-of-the-day-loan-to-value-ratio-ltv\/\">LTV ratio<\/a> from a bank loan is now 75 per cent, down from 80 per cent. For a regular condo priced at $1.5 million, this difference of five per cent means an added down payment of $75,000. But for a shoebox unit priced at $835,000, the additional down payment is just $41,750.<\/p>\n<figure id=\"attachment_23152\" aria-describedby=\"caption-attachment-23152\" style=\"width: 650px\" class=\"wp-caption aligncenter\"><img decoding=\"async\" class=\"wp-image-23152 \" src=\"https:\/\/www.99.co\/singapore\/insider\/wp-content\/uploads\/2019\/02\/Sg-loan.jpg\" alt=\"5 Reasons Shoebox Units are Gaining Popularity Again\" width=\"650\" height=\"398\"><figcaption id=\"caption-attachment-23152\" class=\"wp-caption-text\">Due to the cooling measures imposed in July, shoebox units are more affordable.<\/figcaption><\/figure>\n<p>The other concern is the <a href=\"https:\/\/www.99.co\/singapore\/insider\/property-jargon-of-the-day-additional-buyers-stamp-duty-absd\/\">ABSD<\/a> for owning a second property. For a Singapore citizen, this is 12 per cent of the purchase price or value of the second property, whichever is lower. This comes to around $180,000 for a regular sized, $1.5 million condo. For a shoebox at $835,000 however, the stamp duty is just $100,200.<\/p>\n<p>For most new investors, who don&#8217;t have big budgets, the cooling measures rule out property investments outside of cheaper shoeboxes. And even if the investor wasn&#8217;t cash strapped, shoeboxes remain attractive because of the low initial cash outlay.<\/p>\n<h3>Reason #3: More Singaporeans are staying single<\/h3>\n<p>The proportion of Singaporeans <a href=\"https:\/\/www.businessinsider.sg\/an-increasing-number-of-singaporeans-are-staying-single-especially-women\/\">staying single is growing higher<\/a>, with fertility rates at 1.16 last year (for a population to replace itself without immigration, the rate must be 2.1). This has some bearing on the shoebox market, which were previously considered too small for homes.<\/p>\n<p>While 500 square feet is too small for, say, a wife and two children, it can be sufficient and practical for an individual. It can even fit two lifelong singles quite comfortably. In return, these singles can gain access to condo facilities, a higher standard of interior finishing than a flat, and possibly a better location (e.g. they may be unable to afford a full sized condo in District 9, but a shoebox in this location might not be out of the question).<\/p>\n<figure id=\"attachment_22509\" aria-describedby=\"caption-attachment-22509\" style=\"width: 650px\" class=\"wp-caption aligncenter\"><img decoding=\"async\" class=\"wp-image-22509 \" src=\"https:\/\/www.99.co\/singapore\/insider\/wp-content\/uploads\/2019\/01\/East-side-living.jpg\" alt=\"5 Reasons Shoebox Units are Gaining Popularity Again\" width=\"650\" height=\"483\"><figcaption id=\"caption-attachment-22509\" class=\"wp-caption-text\">Singaporeans choosing to stay single are able to afford a shoebox unit more than an HDB flat.<\/figcaption><\/figure>\n<p>Also, consider the demographic of singles between 25 and 34, who can&#8217;t get an HDB flat (barring the Joint Singles Scheme) but want a place of their own. They can buy a shoebox condo unit, and it may not be priced out of their reach given the low quantum (total cost).<\/p>\n<h3>Reason #4: Some seniors now pick shoeboxes instead of flats<\/h3>\n<p>Older Singaporeans, whose children don&#8217;t live with them, have begun to consider the possibility of shoeboxes instead of flats. Those with bigger budgets may prefer the luxury of a small condo unit, rather than, say, a smaller three-room or two-room flat. Older Singaporeans who are used to condo living may also downgrade from a full sized condo to a smaller one, rather than move back into HDB living.<\/p>\n<figure id=\"attachment_19405\" aria-describedby=\"caption-attachment-19405\" style=\"width: 650px\" class=\"wp-caption aligncenter\"><img decoding=\"async\" class=\"wp-image-19405 \" src=\"https:\/\/www.99.co\/singapore\/insider\/wp-content\/uploads\/2018\/03\/singaporeans-signing-investment-property.jpg\" alt=\"5 Reasons Shoebox Units are Gaining Popularity Again\" width=\"650\" height=\"461\"><figcaption id=\"caption-attachment-19405\" class=\"wp-caption-text\">Older Singaporeans are now considering shoebox units, instead of flats.<\/figcaption><\/figure>\n<p>The smaller unit size is seldom a concern to these seniors (it makes maintenance easier). It also allows them to leave a private property to their children, grandchildren, etc. when they pass on. Seniors who are still active may also enjoy having a private pool, gym, BBQ pits, etc., which are amenities they may not find in HDB living.<\/p>\n<h3>Reason #5: Simple scarcity is causing a rush for shoebox units<\/h3>\n<p>Under URA&#8217;s <a href=\"https:\/\/www.ura.gov.sg\/Corporate\/Guidelines\/Circulars\/dc18-06\">new rules<\/a>, the number of shoebox flats a developer can build is limited. For most developments, the total Gross Floor Area (GFA) divided by 100 will determine the maximum number of units allowable (in some areas the restriction is even tighter).<\/p>\n<figure id=\"attachment_22756\" aria-describedby=\"caption-attachment-22756\" style=\"width: 650px\" class=\"wp-caption aligncenter\"><img decoding=\"async\" class=\"wp-image-22756 \" src=\"https:\/\/www.99.co\/singapore\/insider\/wp-content\/uploads\/2019\/02\/The-Florence-Residences-Showflat-Interior.jpg\" alt=\"5 Reasons Shoebox Units are Gaining Popularity Again\" width=\"650\" height=\"309\"><figcaption id=\"caption-attachment-22756\" class=\"wp-caption-text\">Developments like The Florence Residences are likely to be the last with a high number of shoebox units.<\/figcaption><\/figure>\n<p>Developments like <a href=\"https:\/\/www.99.co\/singapore\/insider\/kovan-florence-residences\/\">The Florence Residences<\/a> are likely to be the last with a high number of shoebox units. As such, buyers can expect a fair amount of competition for them; especially with other investors who&#8217;ve been priced out of bigger condos by the cooling measures.<\/p>\n<h3>In short, the combination of scarcity and cooling measures means you can expect longer queues for shoebox units in the near future<\/h3>\n<p>Until larger condos become affordable again, investors eager to break into the property scene will look at two main options: the first is commercial property, which while exempt from the ABSD, is harder to understand. The other are shoeboxes, which are still priced within reach even with the stamp duties, and which are residential and hence familiar.<\/p>\n<p>But in the interest of livability, we shouldn&#8217;t expect URA to ease up on its restrictions anytime soon. So we expect to see mounting demand for these units, as supply tightens.<\/p>\n<p><i>Would you buy a shoebox unit? Voice your thoughts in our comments section or on <\/i><a href=\"https:\/\/www.facebook.com\/groups\/yourpropertycommunity\/\"><i>our Facebook community page<\/i><\/a><i>.<\/i><\/p>\n<p>Looking for a property? Find the home of your dreams today on Singapore\u2019s largest <a href=\"https:\/\/www.99.co\/?utm_source=blog%20main%20site%20conversion\">property portal 99.co<\/a>! You can also <a href=\"https:\/\/www.99.co\/calculators\/mortgage\">access a wide range of tools to calculate your down payments and loan repayments<\/a>, to make an informed purchase.<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Shoebox units (aka the Property Investor Starter Kit) are much maligned by old-school investors. Too small for families, too cost per square foot, too hard to offload. But if so, why is everyone so interested in these small houses again? Reason#1: Over the long term, shoebox units have performed better than the overall condo market&hellip;<\/p>\n","protected":false},"author":65,"featured_media":25766,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_relevanssi_hide_post":"","_relevanssi_hide_content":"","_relevanssi_pin_for_all":"","_relevanssi_pin_keywords":"","_relevanssi_unpin_keywords":"","_relevanssi_related_keywords":"","_relevanssi_related_include_ids":"","_relevanssi_related_exclude_ids":"","_relevanssi_related_no_append":"","_relevanssi_related_not_related":"","_relevanssi_related_posts":"","_relevanssi_noindex_reason":"","_lmt_disableupdate":"","_lmt_disable":"","_genesis_hide_title":false,"_genesis_hide_breadcrumbs":false,"_genesis_hide_singular_image":false,"_genesis_hide_footer_widgets":false,"_genesis_custom_body_class":"","_genesis_custom_post_class":"","_genesis_layout":"","footnotes":""},"categories":[53601,53602,57131],"tags":[53604,55499,53807],"persona":[],"class_list":{"2":"type-post","13":"entry","14":"has-post-thumbnail"},"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v25.7.1 (Yoast SEO v25.7) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>5 Reasons Shoebox Units are Gaining Popularity Again - 99.co<\/title>\n<meta name=\"description\" content=\"Shoebox units are gaining steam again, and there&#039;s good reason for it. 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