Thursday, August 30, 2012

Singles twist puts boot in shoebox units


Business Times: Wed, Aug 29

[SINGAPORE] Shoebox homes will likely see a drop in demand if the government allows singles to directly purchase new flats from the housing board, say property consultants that BT spoke to.

The extent of the drop will depend on the strength of the restrictions that these experts believe will likely be placed on singles purchasing built-to-order (BTO) flats.

Said International Property Advisor (IPA) chief executive Ku Swee Yong: "Private apartments in the shoebox category (which singles below 35 used to have to buy because they cannot purchase HDB flats) might see demand wane."

This is because the target market for such properties are mainly singles, noted OrangeTee head of research and consultancy Tan Kok Keong. Such homes are 50 square metres (538.2 square feet) and below in size, and have been quite well-received by the market.

"We believe that the impact will be keenly felt in the small sized-apartment market," said Mr Tan.

But how large a dent this will create in the shoebox apartment market will hinge on whether limits, such as income ceiling restrictions, will be imposed on singles who buy BTO flats, said R'ST Research director Ong Kah Seng.

"If there is (an income restriction), then the group that does not qualify for BTO flats will continue to opt for ... private shoebox apartments.

"This will be particularly so for those who are more affluent, who do not need to lease out spare rooms to defray holding costs, and so a shoebox apartment will therefore be ideal since there isn't any spare room for the owner-occupier to lease out."

In such a situation, demand for shoebox homes will not be severely hit, said Mr Ong.

Also, discerning singles with more sophisticated living requirements may find that HDB flats have a fairly mixed profile of residents. "But in a private apartment development, buyers are generally more educated and matching in backgrounds," said Mr Ong.

Eligibility restrictions in areas such as income will also mean that the impact on the HDB resale market may be limited, said SLP's executive director Nicholas Mak. Singles aged 35 and above are allowed to buy resale flats and use government grants.

"The impact on the HDB resale market will depend on how restrictive the regulations concerning the purchase of BTO flats by singles would be. The government has not released the details of such regulations and conditions yet.

"If the regulations are rather restrictive, then most singles will still turn to the HDB resale market to buy the flats that they want. In such a scenario, the overall impact on the resale market will be minimal," said Mr Mak.

He noted that the HDB is "already running at almost full steam" to produce as many new HDB flats as possible to meet demand from eligible buyers. It will put additional stress on the system and the environment if the HDB now has to to produce even more flats to satisfy demand from singles.

"As the supply of new flats will not increase significantly in the short term, singles hoping to buy BTO flats will face strong competition. The result from this factor is that they will still turn to the HDB resale market," said Mr Mak.

Another factor that will impact singles' demand for BTO flats is the type of homes that the HDB will allow them to buy, and the supply of such new flats. "If the supply is low, then the impact on both the new and resale markets will be minimal," said Mr Mak.

  
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