'shoebox' homes here are raking in much higher rental yields for
investors than other apartment types but experts warn the good times
might not last.
Data from the Singapore Real Estate Exchange
(SRX) found that gross yields for shoebox apartments were 5.4 per cent
in the first three months of the year.
This is well above the 2.5 to 3.5 per cent yields that residential properties typically return to investors.
SRX shoebox yield was based on the average rent of $6.51 per sq ft
(psf) per month for the 197 leasing deals inked in the period. The
average unit price of the 123 shoebox homes sold then was $1,450 psf.
rental yield is calculated by dividing the rental sum received over 12
months into the cost of the unit. But SRX calculated the yield by
dividing the average psf rent over 12 months by the average psf price of
units sold in the first quarter.
Shoebox units are typically
500 sq ft or smaller and can be found in projects like Parc Imperial,
Thomson V One and Prestige Heights.
A total of 42 shoebox units
at Prestige Heights have been rented out since the start of the year,
SRX's data showed. They enjoyed average rents of $6.89 psf per month
with yields at 4.9 per cent.
Just last month, a 409 sq ft unit
at the Balestier Road project was leased for $2,850 while another 420 sq
ft apartment secured a tenant at $2,700 a month in February.
were 16 leases signed for shoebox units at Heritage East in East Coast
Road, with average rents of $6.30 psf and yields of about 5.1 per cent.
collates and displays transactions by the major property agencies,
accounting for more than 80 per cent of resale transactions in the
Experts say investors have flocked to the shoebox
segment in droves, attracted by the affordable prices - typically less
than $1 million. In fact, about one in seven buyers picked up new homes
500 sq ft and smaller last year, according to R'ST Research.
And the climbing yields seem to be the main driver pulling investors in.
of these tiny apartments have climbed from 4.4 per cent in the first
quarter of 2010 to 5.4 per cent in the first quarter this year.
is more than double the rental yield of 2.4 per cent in the luxury
segment, according to analysis by Citi Investment Research. It also
dwarfs the 3.6 per cent yield in the mid-end segment and 4.1 per cent
yield for mass market homes.
But these high yields are not expected to last as an increasing supply of completed shoebox homes enters the market.
The number of these small homes is expected to double from about 4,100 units later this year to 8,200 units by the end of 2015.
note that many of the completed shoebox apartments are in good
locations such as in the city fringe area and River Valley area and are
thus commanding decent rentals now.
Many of the upcoming units, however, are in suburban areas, which might not be able to support similar rent levels.
Tan Kok Keong, OrangeTee's research and consultancy head, said that
while a dip in prices of shoebox flats could cause yields to rise
temporarily, yields are likely to trend towards the norm of 2.5 to 3.5
per cent in the long run as supply picks up.
He expects the
yield gap between shoebox units and typical residential yields to narrow
to between 0.5 and 1 per cent from 2014 onwards.
firstname.lastname@example.org Source: The Straits Times