Tuesday, August 23, 2011

More units cranked out as home sizes shrink

(SINGAPORE) A study by Savills Singapore has put some hard numbers to the big lure of small apartments. Developers have been squeezing out more units on sites bought at state land tenders in recent years than was initially estimated.
The study was based on 51 private housing sites including seven executive condo (EC) plots sold under the 2006-2010 Government Land Sale (GLS) Programme and took in projects launched up to Aug 10 this year.

The total number of private homes actually generated on these sites will exceed the GLS Programme estimates by about 11 per cent. Excluding EC sites, the surplus supply is slightly higher at 12 per cent.

Urban Redevelopment Authority's spokesperson said: 'The estimated number of residential units in the GLS announcement is intended to serve as a guide only.'

Once developers that have bought sites at state tenders receive planning approvals, URA uses actual supply numbers for estimating pipeline supply.

Savills' study shows that the supply from projects on each of eight sites exceed the supply estimate in the GLS Programme by more than 40 per cent. Savills found that a substantial portion of units in these developments are below 800 sq ft, and in some cases, even under 500 sq ft.

While shoebox units have fuelled the trend of developers minting more units in their projects, this was mitigated by ECs, a public-private hybrid housing form targeted at families and where units are larger. The government began selling EC land in 2010 after a five-year hiatus.

Another finding in the study is that the trend of producing 'surplus' units over the GLS Programme supply estimate gathered momentum after 2007. Private residential sites tendered under the 2007 GLS Programme generated just about 3 per cent more units than estimated in the Programme. This surplus increased to 9 per cent for sites sold in the 2008 GLS slate, 14 per cent for 2009 plots and - if EC sites are included - 15 per cent for 2010 GLS sites. If EC sites are excluded, the last figure would be 19 per cent.

During the 2007 luxury housing boom, large apartments were in vogue, but demand for them thinned when the Global Financial Crisis erupted in 2008. 'When the home buying recovery began in 2009, developers took to building smallish units to make the lumpsum apartment price more affordable to a larger pool of buyers while achieving higher per square foot prices,' notes Savills Singapore research head Alan Cheong. Besides shoebox units (loosely defined as below 500 sq ft), sizes of two and three-bedders have also shrunk to 'compact' units at some projects.

Savills highlighted that projects with more than 40 per cent 'surplus units' generally have a substantial portion of small units. Examples include Allgreen's Suites at Orchard at Handy Road, where 47 per cent of the project's total 118 units are below 800 sq ft, and the 360-unit Skysuites@Anson at Enggor Street, with 44 per cent of units under 500 sq ft and 88 per cent below 800 sq ft.

Far East Organization projects The Greenwich at Seletar Road, The Tennery in Bukit Panjang and the recently launched Euhabitat at Jalan Eunos have 50 per cent, 67 per cent and 59 per cent respectively of units below 800 sq ft - though all units are above 500 sq ft.

Savills' figures show that 'surplus production' tends to be smaller for EC plots - in line with the fact that EC projects do not include one bedders. If EC sites are excluded, the proportion of surplus private homes on sites sold under the 2010 GLS Programme against the supply estimate was 19 per cent. If ECs are included, the surplus is just 15 per cent.

This difference is more pronounced for plots in the H2 2010 slate, with 19 per cent 'surplus units' if EC sites are excluded and 13 per cent if they are included. This is on the back of three EC projects released on H2 2010 sites - the 315-unit Belysa in Pasir Ris, the 602-unit Blossom Residences at Segar Road and 504-unit RiverParc Residence in Punggol.

URA said it regularly reviews space standards, that is, gross floor area per housing unit, used to estimate the number of homes that can be generated from GLS sites for residential developments. 'The most recent review, which covers residential projects in all locations..., was done in 2010 and the updated space standards were adopted since the H1 2011 GLS Programme,' its spokesperson said.

DTZ South-east Asia chief operating officer Ong Choon Fah observed that over the past 15-20 years, the typical size of a three-bedroom apartment has shrunk from about 1,600 sq ft to 1,200 sq ft, with compact three bedders at 1,000-1,100 sq ft.

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