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Shoebox units fuelling demand for rental homes

Buoyed by a surge in interest for shoebox apartments, rental demand for housing units remained strong in Q2, according to media reports.

Based on data from Square Foot Research, rental contracts in the non-landed private residential market grew 11.6 percent from the previous year to 12,352 in the second quarter. In 1H2013, 22,937 rental contracts were secured, up 10.2 percent from a year ago. Despite having the lowest market share of 3.3 percent, shoebox units accounted for 26 percent of total rental growth from 1H2012 to 1H2013.

Rentals for shoebox homes, which are defined as units measuring between 300 sq ft and 500 sq ft, soared 93 percent to 748 contracts in the first half of 2013. 

The surge in interest is primarily attributed to new shoebox units being completed in 2H2012, which accounted for 55 percent of total shoebox demand during that period and 35 percent of total shoebox rental demand in 1H2013.

Location was a major factor in the popularity of such homes, with shoebox units in the Core Central Region (CCR) witnessing a higher take-up rate of 65 percent compared to those in the Outside Central Region (OCR) at 52 percent. 

Within the CCR, Districts 9 and 10 saw strong take-up rates for new projects. In fact, Vivace saw a 91.9 percent take-up rate for its shoebox units based on the number of rental contracts signed against the estimated number of said units available. The average rent stood at around S$3,340 per month.

Suites@East Coast in the OCR achieved a rental take-up rate of 68.6 percent, while Siglap V recorded a rental take-up rate of 63.2 percent. Centra Studios and Centra Suites in the Rest of Central Region (RCR) posted rental take-ups of 81.3 percent and 87.9 percent respectively.

Meanwhile, six new projects with shoebox units have been completed in District 14 since 2012, with an average take-up rate of 65.8 percent in 1H2013.

Going forward, Square Foot Research expects rental demand to remain firm given the positive job prospects in Singapore, while demand will be fuelled by the restrictions placed on residential property purchases by PRs and foreigners.

"However, with the record-high number of projects completing in 2014-2015, the surge in overall supply may drive rents down, offering tenants a greater variety of choices beyond shoebox units at increasingly competitive rental prices. This may ultimately affect the draw towards shoebox units," it added.

 

Romesh Navaratnarajah, Senior Editor at PropertyGuru, edited this story. To contact him about this or other stories emailromesh@propertyguru.com.sg

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