Shoebox apartments outside the city centre could lose their cachet once the flood of new homes hits the market next year.
Experts note that tenants are enjoying greater choice, and that will only get better as the pool of available real estate deepens.
That trend spells bad news for suburban shoebox homes, which have a limited appeal given their location and relatively cramped living space.
Of the 53,900 new condo units expected to come on the market in the next 30 months, the experts point out, most will be small or shoebox apartments - with a floor area of up to 506 sq ft.
Landlords of such flats in less accessible locations will likely find it "challenging" to let out their units.
Since 2009, when shoebox units became popular, the bulk of transactions in this category has been outside the city centre, noted Ms Lee Lay Keng, regional head of research at DTZ.
Of the 12,097 shoebox units sold since 2009, about 47 per cent were in city fringe areas and around 37 per cent in the suburbs.
"Owners of such units for investment would not be as successful at getting the kind of rentals they want going forward.
"There will be pressure on vacancies, as they will be facing competition from the broader market too," said CBRE research head Desmond Sim.
There are no official figures on the number of shoebox units on the market, but the Urban Redevelopment Authority (URA) in September 2012 projected that there were about 2,400 completed units as at 2011, with the figure rising to 11,000 by the end of next year.
These small homes featured heavily at newly launched projects from 2009 to 2012, including the 293-unit Alexis in Alexandra Road, the 138-home Parc Imperial in Pasir Panjang Road and the 72-unit Suites@Guillemard in Lim Ah Woo Road.
Though they tend to have a higher price per sq ft (psf) due to their small size, investors find the total quantum "more palatable, especially amid tightened financing", said Ms Chia Siew Chuin, director of research and advisory at Colliers International.
Rental yields of shoebox units typically range from 3 to 4 per cent, trumping the 2 to 3 per cent yields for residential developments islandwide.
While the quantum price may seem attractive, investors looking to buy shoebox apartments should bear in mind that rents are expected to soften in line with the flood of newly completed condos, experts said.
Ms Lee also noted that room for capital appreciation for shoebox units appears limited as median prices - on a psf basis - have risen by about 24 per cent in the four years since the second quarter of 2009, against the 50 per cent gain for condos islandwide.
After tighter property financing rules were imposed in the second quarter of last year, median prices of shoebox units fell by 5 per cent against a 2 per cent decline for non-landed homes.
Despite this, there were 710 shoebox units sold in the first half of the year, according to caveats lodged with URA.
"Shoebox units will continue to appeal to singles and couples without children, as well as expats on local employment terms or with smaller housing budgets," said Ms Chia.