Consider these when buying shoebox units

By Feily Sofian / The Edge Property | April 22, 2016 10:36 AM SGT
Using new sales caveats from 2012 onwards as a proxy, there are at least 9,600 shoebox units island-wide that have recently been, or will soon be, completed. Geylang has the highest supply pipeline with at least 1,200 units. However, its proximity to the CBD, Paya Lebar growth corridor and industrial areas in the East mitigates the risk of severe rental downside.
However, shoebox rents in the North-East Region will be under pressure given at least 2,000 shoebox units have recently been, or will soon be, completed. While the development of the Punggol Creative Cluster and Learning Corridor will boost rental demand, competition for tenants will be stiff. In addition, there will a bumper supply of new HDB flats that will soon fulfil their five-year Minimum Occupation Period, which will compete in the rental market. The full impact on shoebox rents, as a result, has yet to be felt.
Estimated number of shoebox units that have recently been, or will soon be, completed
Graphic by Kim SY
Projects in the pipeline with a substantial number of shoebox units include Midtown Residences, Parc Centros, Riversails, The Promenade @ Pelikat and Vibes@ Upper Serangoon. The vacancy rate for apartments and condominiums in the North-East Region stood at 12.3% and 11.9% respectively as at 1Q2016.
The East Region trailed closely with at least 1,500 shoebox units that have recently been, or will soon be, completed. The bulk of these are located in Pasir Ris from projects such as D’Nest, Ripple Bay and The Inflora. The vacancy rates for apartments and condominiums in the East Region stood at 8.7% and 10.4% respectively as at 1Q2016.
Shoebox rents have fallen by more than 20% since their peak
Landlords of shoebox units have lost about $600 per month, or a quarter of their rental income, as rents plunged from their peak in 3Q2013. Monthly rents for shoebox homes, defined here as those measuring 500 sq ft or less, dived 23% from $2,792 in 3Q2013 to $2,139 on average in 1Q2016. The analysis is based on rental data mined by the URA.
In contrast, the average rent for all private, non-landed homes...