Sunday, August 10, 2014

The smaller the unit, the cheaper the rent? Not necessary so!


Rental for shoebox units are not necessarily cheaper than small apartments (i.e. those above 500sqft) within the same development. This is according to rental data from URA.
 
As an example, one can rent a shoebox unit of 300 - 400sqft at Alexis for between $3,200 to $3,500 per month. However, he can actually get a larger unit in the same development for around the same amount of rental.
 
The same scenario are currently being played out in other developments around Singapore as well.

 
The higher rental yield and per square feet (psf) rental commanded by shoebox units tend to be the market norm. In general, psf rental for small apartments are about $1 higher than those of medium and larger-sized units. For shoeboxes, the difference can be up to $3 higher. The overall average rental at Alexis, for example, is $4.90psf. However, average rental for units that are 600sqft or smaller is as high as $7.30psf.

But given the current depressed rental market, the difference in asking rent between shoeboxes and their larger counterparts are becoming smaller. As such, owner of shoeboxes are finding it increasingly challenging to rent out their units. Some savvy tenants have resorted to renting larger apartments and sub-letting one or two bedrooms in order to subsidize their rental cost. This has resulted in a larger number of empty shoebox units.
 
And the situation may be getting worse. About 10,000 new shoebox units are expected to be completed from 2014 to 2017.  Going forward, property consultants say that rental for shoebox units may likely fall between 10 - 15%.

Looks like stormy seas ahead for shoebox investors seeking rental...

 

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