Friday, June 8, 2012

Shoebox glut will distort planning, hit infrastructure

Business Times: Thu, Jun 07
CHENG Wai Keung thinks building too many shoebox apartments will distort planning and put a strain on surrounding roads and other infrastructure.

He also urges buyers to beware this housing format, since it is still not widely tested.

"If you build too many shoebox units, you create a distortion in the market, because now all of a sudden you have a lot more people living in a place than the (planning) forecast . . ." the chairman of Wing Tai Holdings said in a recent interview with BT.

He suggests that the government, when it sells residential sites, could stipulate a minimum unit size for the development.

Alternatively, the maximum number of units could be stated. Leaving too much flexibility to the market may not be a desirable outcome for the planning process as it could throw the whole forecast off track.

"So from that perspective, the government should (state) a minimum unit size so as not to distort the planning too much in terms of population in that precinct."

Assuming developers who mint shoebox units end up building more units in a project than envisaged by the planning authority, this would translate to a higher car population in the development and hence potentially strain roads in the area, argues Mr Cheng.

Mr Cheng sounded a note of caution to those thinking of buying shoebox apartments. Even after changes to the Housing Developers (Control & Licensing) Act - requiring showflats to depict the actual units accurately - take effect later this year, stepping into a showflat for a shoebox unit will be "nowhere as the same feeling when you go into the actual building".

Secondly, while rental returns for completed shoebox apartments seem to make sense now amid the current buoyant property market, things may change in a downmarket.

"When the market is bad . . . these are the ones that will be more affected than normal-sized apartments," according to Mr Cheng, though he qualifies that his view is not tested since the stock of completed shoebox apartments is still low.

Urban Redevelopment Authority data released in April shows that the stock of completed small apartments (below 50 sq metres) on the island is set to increase from about 2,400 at end-2011 to 8,200 units by end-2015.

These estimates are based on the pipeline supply of such units that have been sold by developers as at end-2011; so the actual shoebox stock in future years could be larger since URA's estimates do not include shoebox units that had yet to be sold as at end-2011...
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