Developers will need to provide for larger homes in non-landed projects in the Central Area from January 2023, when new guidelines from the Urban Redevelopment Authority (URA) for dwelling units kick in.

From Jan 18, 2023, a minimum of 20 per cent of dwelling units (DUs) with a nett internal area of 70 square metres (sq m) will be required for all new flats, condominiums and residential components of commercial and mixed-use developments in the Central Area. This size is considered reasonable by URA for small families, taking into account the tighter space constraints of the Central Area.

“URA has not imposed a cap on the total number of DUs within the Central Area because it is generally well-served by public transport, with residents here less reliant on private vehicles. As such, new developments are less likely to put a strain on local infrastructure,” said URA.

Since 2018, when URA revised guidelines to “moderate the excessive development of shoebox units”, requirements on dwelling unit size have been applied only to projects outside the Central Area. Developers have to set at least 20 per cent or more of a project’s DUs with nett internal area of at least 100 sq m, and at most 20 per cent of the DUs with nett internal area of less than 50 sq m.

“However, for developments within the Central Area, URA has observed a persistent trend in declining DU sizes. There is thus a need to ensure a good mix of DU sizes within the Central Area to support the planning intention,” URA said in its circular issued on Tuesday (Oct 18).

“URA will continue to monitor and review the guidelines periodically, taking into account factors such as lifestyle changes and infrastructural developments,” it said.

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Analysts noted the timeliness of the guidelines in relation to upcoming developments, notably the new Greater Southern Waterfront.

“The policy guideline was likely formulated in consideration of new developments, such as the redevelopment of the former Fuji Xerox Towers and AXA Tower, as well as the planning intent of a vibrant downtown that extends seamlessly to the new Greater Southern Waterfront, where work, live and play can occur 24/7,” said Lam Chern Woon, head of research and consulting at Edmund Tie.

These guidelines will also help to arrest the shrinking of homes in the Central Area, where prices are significantly higher than on the rest of the island.

As Catherine He, director and head of research, Singapore at Colliers, noted, median unit prices in the Central Area are 15.8 per cent higher than the Rest of Central Region (RCR) and 34.6 per cent higher than Outside Central Region (OCR). Meanwhile, the median size of new residential units in the Central Area has dropped to 73 sq m in Q3 2022 from 94 sq m in Q3 2017 as Central Area projects were exempt from the minimum size requirements.

“The situation can be attributed to the rising land cost as developers try to maximise the efficiency of their land plots,” He said.

“To ensure at least 20 per cent of units are at least 70 sq m is a reasonable limit, as this will ensure developers provide a good mix of sizes to cater to different household sizes and segments.”

The impact of these guidelines on the market is likely to be subdued due to the attractiveness of living in the Central Area. In fact, larger units might draw more investors and homeowners to the area.

“In particular, foreigners who are increasingly looking to invest in residential properties in the prime or downtown localities have also exhibited a penchant for larger units,” said Edmund Tie’s Lam.

These guidelines would also help prevent the issue of unsold units in a development.

“Therefore, there is a need to provide residential units of reasonable living sizes to draw larger households to the Central Area, as without this guideline, there might be an overwhelming of smaller units left on the shelf,” said Colliers’ He.

Lee Sze Teck, senior director (research) at Huttons Asia, said the rule change could impact the prospects of some en bloc sales in the Central Area.

“Together with the increase in land betterment rates and changes to how gross floor area is computed, the costs to developers will rise considerably and eat into the margins of developers. Developers may reassess potential bids for en bloc sites,“ he explained.