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Shoebox apartments are still selling, which can only mean one thing: Generations of crowded MRT trains and overloaded buses are finally taking effect. Singaporeans are being conditioned to tolerate spaces that, in any other country, would be considered too inhumane for hamster cages. Why else would we consider 500 square feet to be not only suitable living space, but a good investment? What twisted psychological illness afflicts this country? I take a look in this article:
A way for real estate developers to rip you off. Also, apartments up to 500 square feet. Many shoebox apartments are considerably smaller, for people who don’t mind bedrooms with the spaciousness of a choked sewer pipe. Shoebox units are intended for short-term tenants; they aren’t designed for family living, unless you consider claustrophobia a desirable trait in your children.
Despite the lack of space, shoebox apartments can cost up to 20% more per square foot.
Stupider Stranger things have happened. The Straits Times reports that, as of 2011, one in seven homes sold was a shoebox apartment. That’s around 2,400 units. This is a volume seven times greater than in 2008, and a 20% increase from 2010.
The trend seems to be continuing, with developers offering shoebox units at Euhabitat, The Tennery, and Seastrand. But what keeps Singaporeans interested in these properties?
Although shoebox apartments are more expensive per square foot, their overall cost is lower. This makes them attractive to investors who can’t afford bigger property.
This shouldn’t be interpreted as a budgetary move; it’s more like someone sneaking into a high-stakes game which they don’t have the capital to play. In all frankness, someone who can’t afford the property shouldn’t be gambling on the property market. But if they’re desperate to break in, a shoebox apartment puts their foot in the door.
And if the rental yields aren’t what they expect, that door will slam shut and take their foot off with it. Speaking of which, another reason is…
A lot of shoebox apartments aren’t bought to be lived in. Because, you know, living spaces should be larger than your high school locker room. These buyers are just looking to rent.
In 2011, when property prices went more ballistic than a pop star without Prozac, some foreigners decided renting is more affordable. The new additional buyer’s stamp duty (ABSD) only added to this, eventually raising rental costs by 5-10%. Some people wanted in on that rental income, but couldn’t afford to buy a real house. Hence, the shoebox apartment.
These would-be landlords are doing a spot of gambling. More apartments are becoming available for rent, and rental prices might be creeping toward unsustainable levels. With high end shoebox apartments, there’s a chance that future rental income might not keep up with loan repayments.
Shoebox apartments are also a favourite amongst property developers. Think about it: it’s more dollars per square foot. A property developer doesn’t care that the overall cost per unit is smaller; they’re selling the entire condo, so price per square foot counts the most.
When developers discovered the market willingly pays more for smaller units, they probably started pre-ordering their yachts. Right now, property developers are more than happy to encourage market demand for shoebox apartments. And they do that by cranking them out faster than Melanine in a Chinese milk factory.
You know who tolerates shoebox apartments? Singles who intend to stay that way. When your idea of romance is a midnight power meeting, you may as well get a vasectomy.
Singaporeans aren’t big on family these days, and few yuppies see the need for a semi-D or bungalow (unless it’s to show off). This is a sociological issue; the demand for shoebox apartments may correspond to a shrinking native population, and a crowded influx of foreigners.
Did I hear a clucking sound? Oh right, it’s that group of over-cautious investors. Can’t fully blame them though; in 2011, the global economy looked more terminal than bathing naked in the Fukushima reactor.
Risk-averse investors wanted smaller loans, but without losing their rental income. Shoebox apartments were ideal: A tenant in a high end shoebox unit still pays high rent, but the landlord’s loan repayments are smaller. Of course, as the global situation improves, this sentiment may change.
I discussed the viability of shoebox apartments in another article. But if you still want to buy one, make sure you get the cheapest possible loan.
Visit Smartloans.sg, a free-to-use websites that compiles home loan packages from all local banks. Just enter the property type and your desired loan amount, and the site will find you the best loan package. You can also speak to the site’s mortgage specialist, who will advise you further.