Investvine-Oct 18

Singapore’s Urban Redevelopment Authority (URA) on October 18 announced an upcoming regulatory change for the city state’s property developers, mandating that the average size of new private flats outside the central area will have to be at least 85 square meters in average of gross floor area, up from previously 70 square meters, a far cry from some shoe box-sized apartments having been built and sold in the past.

The new guidelines, which will come into effect by January 17, 2019, are therefore cutting the number of possible units allowed in a project – something that developers say might increase prices of condos and make it difficult for low-income earners, retirees or singles to afford one. However, the URA argued that the move was made to manage potential strains on local infrastructure and ensure the livability of residential estates.

The authority further announced that nine areas in Singapore – up from presently four – will be subject to an even more stringent minimum average requirement of 100 square meters, namely Marine Parade, Joo Chiat-Mountbatten, Balestier, Telok Kurau-Jalan Eunos, Stevens-Chancery, Pasir Panjang, Kovan-How Sun, Shelford and Loyang.

Real estate agents said that the new limits will reduce the number of units in a development by up to 30 per cent, curbing developers’ ability to prop up profit margins by launching smaller units as the number of shoe box units entering the market will naturally come down in the longer term.

As a result, major property stocks, including City Developments, CapitaLand and Ho Bee Land, fell sharply on the news. Analysts said that developer stocks are likely to remain under pressure and could even “test new trough levels” which could mean a near-term downside of up to ten per cent.

They also estimate there could also be a 20 to 40 per cent drop in land prices with the revised unit size rules, as home buyers are likely to hold back purchases to 2019 to wait and see what impact the regulation will have on condo bidding prices.

http://investvine.com/singapore-cracks-down-on-shoe-box-sized-apartments/