New guidelines on "Shoe Box" property in Singapore

URA issues new guidelines today on “Shoe Box” property projects, to take effect 4 Nov. Says, to avoid “Shoe Box” units forming a disproportionately large portion of housing stock, it will introduce a cap on the max allowable no. of dwelling units for non-landed residential devts outside the Central Area. Based on the proposed formula, this effectively means that the average size of each dwelling unit per devt should be at least 70 sqm. The measures will likely impact developers which have been focusing on shoebox projects, notably Oxley.

URA has issued new guidelines, which take effect on 4 Nov, to cap the number of shoebox apartments in non-landed private residential projects outside of central area suburban areas. So-called shoebox apartments have floor areas of 500sf or less. The new guidelines are meant to encourage developers to provide homes of various sizes that better cater to varying needs of Singapore residents.

Oxley is a specialist developer of Shoe Box units. To-date it has launched 8 shoebox apartment projects and fully sold 7 of them wit the majority expected to TOP in Dec 2014 and Dec 2015. The group currently has another 6 similar projects with a total GFA of 270,000sf (~10.5% of gross value) in the pipeline. To mitigate the policy risk in this market segment, the group has diversified its portfolio to industrial and commercial developments with the purchase of 4 sites in Ubi, Geylang and Robinson Road to develop small format industrial units and strata titled offices.

In my humble opinion, this would bring down the average PSF for residential building, due to limitation supply of the "Shoe Box" property projects and may cool down the speculation on this property. To most of the buyers, I believe they are just investors who hope for better rental yield as compared to letting out other type of residential building.

With more regulation activities applied, I think the property price would stabilize in mid-to-long term.