Affordability for home buyers may be affected as developers have to build bigger units: Redas

The rule changes from the Urban Redevelopment Authority will have the effect of curbing the proliferation of shoebox units in new projects. PHOTO: ST FILE

SINGAPORE - The new rules on average unit sizes could price some private non-landed property home buyers out of the market, the Real Estate Developers' Association of Singapore (Redas) said on Thursday (Oct 18).

The rules announced on Wednesday, which are aimed at managing potential strains on infrastructure, will require developers to build bigger private housing units.

The rule changes from the Urban Redevelopment Authority (URA) will have the effect of curbing the proliferation of shoebox units in new projects. They will apply to new development applications submitted on or after Jan 17.

Redas noted: "Developers build based on market demand. They are building fewer smaller dwelling unit sizes... as demand has reduced over the years.

"Notwithstanding this, with the new guidelines, developers have to build bigger units, which may affect the affordability of people who want to retire and downsize, and millennials who want smaller dwelling units and flexible living."

OCBC analyst Andy Wong Teck Ching believes the new rules will "add further stress to the property market".

Mr Wong added: "The en bloc market, which has dried up (since the) cooling measures announced in July, will likely see a more significant impact."

"We believe these measures will likely result in developers submitting less aggressive bids for future land tenders," he said.

Under the new rules, the maximum number of units allowed in a development outside the central area will be arrived at by dividing the proposed building gross floor area (GFA) by 85 sq m.

The current formula divides GFA by 70 sq m.

This means around 18 per cent fewer units will be allowed if developers maximise their quota.

The 70 sq m rule was initially imposed in 2012 alongside a stricter one that affected four areas to avert a severe strain on infrastructure. This meant GFA was divided by 100 sq m.

Wednesday's changes have broadened this to include five new areas in addition to the initial four.

The nine areas are Marine Parade, Joo Chiat-Mountbatten, Telok Kurau-Jalan Eunos, Balestier, Stevens-Chancery, Pasir Panjang, Kovan-How Sun, Shelford and Loyang.

In addition, also from Jan 17 next year, the bonus GFA cap for private outdoor spaces will be reduced from 10 per cent to 7 per cent, while the total balcony area for each unit will be capped at 15 per cent of the net internal area.

Redas said the 7 per cent guideline is aimed at providing home buyers with "more choices of units with and without private outdoor spaces".

It added: "The reduction of Bonus GFA Cap for private outdoor spaces arose from URA's observation that the full 10 per cent bonus GFA is not usually taken up."

However, developers can still achieve up to 10 per cent bonus by qualifying for other incentive initiatives such as the Green Mark Bonus GFA Scheme.

Redas added that it "welcomes the new bonus GFA scheme as it allows developers to provide additional facilities and covered communal spaces for residents".

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