[SINGAPORE] Small units of up to 800 square feet made up a record proportion, 47.6 per cent, of non-landed private homes sold by developers last year. This was up from 43.4 per cent a year earlier.
A caveats analysis by CBRE found that the over 40 per cent share started in 2011.
"This is a function of supply," said CBRE Research associate director Desmond Sim, "as developers have been reducing unit sizes to keep the absolute price quantum affordable to buyers especially investors, who have been slapped with successively tighter loan limits in recent years."
The spike in small units' share, however, is not due to the so-called shoebox apartments (below 500 sq ft) but to 500-800 sq ft units.
The property consulting group's analysis - which excluded executive condos, a public-private housing hybrid - found that 500-800 sq ft units' proportion has increased steadily to 34.4 per cent last year, from 29.7 per cent in 2012, 25.9 per cent in 2011 and 18.9 per cent in 2010.
This reflects the trend of developers minting more compact two- and three-bedders in a bid to keep absolute price quantums within buyers' reach - despite higher per square foot prices.
Meanwhile, the share of shoebox units dropped to 13.2 per cent last year, from 13.8 per cent in 2012 and the high of 15.1 per cent in 2011.
Analysts attribute this partly to an Urban Redevelopment Authority cap, effective Nov 4, 2012, on the number of homes in new non-landed residential projects Outside the Central Area, based on an average unit size of 70 square metres (753.47 sq ft) gross floor area.
The growing share of small homes in the past few years is also reflected in a contraction in median unit sizes - the figure has shrunk 30.6 per cent to 829 sq ft last year from 1,195 sq ft in 2009. Over the same period, the median per square foot price increased 47.2 per cent to $1,354 from $920, while the median lumpsum unit price rose 12 per cent to $1.08 million from $965,000.
Market watchers note that the end of the global financial crisis was marked by an era of unprecedented money-printing by governments in many parts of the world, creating a surge of global liquidity and low interest rates.
This has resulted in investors snapping up properties in many markets - including Singapore, driving up suburban condo prices.
To counter this, some developers began building a higher ratio of small units to keep lumpsum prices affordable and widen the pool of potential buyers.
Developers have also found that small units help investors overcome the lower loan-to-value limits introduced for those with at least one existing home mortgage and seeking to buy more residential properties.
And with the Total Debt Servicing Ratio framework rolled out last June, financial institutions are required, when granting property loans to individuals, to cap a borrower's total monthly debt obligations to no more than 60 per cent of gross monthly income.
"Thus, it has become increasingly difficult for potential homebuyers to obtain a loan, if they do not have enough cash," noted Mr Sim.
Developers told BT that in 2009, after the global crisis, they were building two-bedroom apartments of typically around 900-950 sq ft. This has shrunk to 700-750 sq ft compact two-bedders today. Over the same period, three-bedroom units have been compressed from 1,100-1,150 sq ft to around 950 sq ft.
Frasers Centrepoint Homes CEO Cheang Kok Kheong said that demand for compact units comes from young couples to baby boomers/retirees. "Most buyers still want the master bedroom and kitchen to be sufficiently sized. We're also seeing creative storage solutions - for instance, above wardrobes, near the ceiling (by moving air-con pipes to the side) and insertion of linen storage areas along the corridor between the living room and bedrooms."
Looking ahead, Mr Sim said that in light of reduced spending power of buyers post-TDSR, developers are likely to stick to the strategy of carving out a high ratio of affordable homes. "Hence, we will continue to see small-format homes making up a high proportion of new home sales."
Mr Cheang reckoned that if more study/library space is provided as part of a development's common facilities, compact apartment sizes could potentially be trimmed a further 5-10 per cent. "But we've not done that because our customers are not ready."
Agreeing, another developer said that unit sizes are unlikely to shrink further for the time being. "However, the proportion of developer sales in the sub-800 sq ft category may still go up because TDSR has reduced loan availability and the still-high property prices force buyers to look at compact units to keep within their budget."