Sunday, July 3, 2011

Small homes a hit with singles and expats

LIVING in a tiny apartment might be a claustrophobic nightmare for some, but the prospect of a home, however small, that is affordable and centrally located is a hard combination to beat.
The smallest types, the so-called shoebox apartments - they are less than 500 sq ft - have certainly proved popular, particularly with young singles and expatriate professionals.

Consultants say they offer healthy yields of 3 per cent to 4 per cent depending on the project, while residential yields in general hover around 3 per cent.

Earlier this year, a 474 sq ft unit at Robertson Edge went for $858,000. Assuming a monthly rental of $3,000, the yield works out to 4 per cent.

The popularity of shoeboxes has stumped some market observers, who wonder how people could opt to live in such small spaces, yet tenants and owner-occupiers told The Straits Times they were happy with their tiny homes.

While there were inconveniences, including clearly the lack of storage space, the ease of upkeep was a big plus. Ms Natalie Sheguy, 26, who lives in a flat of about 500 sq ft at Robertson Edge off Mohamed Sultan Road, cited storage as one of her biggest challenges.

The Korean banker, who pays rent of $3,000, said the project's convenient location - a 10-minute drive from her office - and privacy were the key draws.

Ms Marianne Kroha, who lives in a slightly larger apartment of about 700 sq ft spread over two floors at the same project, had told her agent to find her a small but centrally located home.

Her previous apartment - a 2,000 sq ft unit at Pearl Bank in Outram - was too big for just one person and lacked nearby facilities, she said. 'Location is key. Over here, it's very convenient as I'm close to restaurants and bars and to my office at Raffles Place. This is the smallest apartment I've ever lived in but the small size also makes it easy to clean,' she added.

Ms Kroha, a 34-year-old American who works in financial services, moved in in April and pays $3,800 a month in rent.

But finding adequate storage, for example, has been tough. Her mail and books are packed in kitchen drawers while excess clothes and shoes are stuffed in the unit's bomb shelter.

Entertaining guests has also been 'challenging', she admitted. The narrow L-shaped living room means little space to place a table when guests come for dinner.

Other tenants agreed the city-fringe location of most newly built shoebox developments - but without the sky-high rents - appealed most.

Developers use measures such as higher ceilings, more windows and a more squarish layout to make the space seem larger. Another reason why these projects can be tenanted out is that all the developments on the market are practically brand new. An expatriate tenant at the Axis in Balestier, who declined to be named, said: 'It's almost brand new. When we were first looking, we found that it's not that easy to find an HDB flat for rent.'

Experts say shoebox units are fetching healthy rents now as there are not many of such completed projects. Some of the smallest ones, such as Suites@Guillemard with units under 300 sq ft, are not ready yet.

But ERA Realty key executive Eugene Lim said the test will be to see if rents hold even when thousands of completed shoebox units enter the market over the next few years.

National Development Minister Khaw Boon Wan recently noted that the number of completed shoebox units will more than triple to 3,800 by 2014. He said on his blog that many newer shoebox units will be in the suburbs, an untested market, which should make buyers weigh the benefits and risks carefully.

Cushman & Wakefield Singapore vice-chairman Donald Han added that it will be 'survival of the fittest' once more of these tiny apartments enter the market.

'Demand for such homes is limited and only the most well-located ones will continue attracting interest as tenants are sacrificing space for convenience... The fad will pass and yields might come down for some,' he added.

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