URA move to cap shoebox units may lead to lower condo prices

Under the new rules, more areas will also fall under the formula where the GFA will be divided by 100 sq m, including areas like Marine Parade and Balestier. ST PHOTO: ALPHONSUS CHERN

Prices of private apartments and condominiums outside the central area may come under pressure with the Government's move to reverse the trend of developers building more and more shoebox units, say market experts.

The Urban Redevelopment Authority (URA) announced on Wednesday that it will cut the maximum number of units allowed in new private flat and condo developments outside the central area from early next year, in a bid to manage potential strains and stresses on infrastructure.

The new guidelines will apply to new development applications for projects submitted on or after Jan 17 next year.

Under the new rules, the maximum number of housing 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.

Taken collectively, analysts say the guidelines favour home buyers, as they are likely to result in larger unit sizes and possibly lower average selling price (in per square foot terms).

Savills Singapore senior director of research and consultancy Alan Cheong believes the new rules aim to address a potential oversupply of units that could have come on collective sale sites. "This especially as the population isn't growing as fast as supply," he added.

Mr Eugene Lim, key executive officer of ERA Realty Network, said: "Developers have kept unit sizes small in order to keep price quantums palatable. However, some buyers have found that these smaller units are not comfortable to live in."

"Given the new guidelines, developers will have to build bigger units in order to maximise the GFA of the land. Where possible, and in order to keep the absolute price of units affordable, developers may have to sell at a lower per square foot price," he said.

Meanwhile, nine areas will face even more stringent requirements, where the GFA will be divided by 100 sq m to work out the maximum number of units that can be built. This is to avert a severe strain on infrastructure.

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

Now, only four areas - Telok Kurau, Kovan, Joo Chiat and Jalan Eunos - face the tougher guidelines.

The URA first introduced guidelines in 2012 to rein in tiny units. Then National Development Minister Khaw Boon Wan had pointed out in a blog that the Telok Kurau area had experienced "a rampant development of tiny shoebox units" resulting in severe traffic congestion, shortage of carpark spaces and double-parking.

Wednesday's tightening came amid concerns over smaller unit sizes in new private housing projects, and that "the number of redevelopments in certain locations may strain infrastructure".

Ms Goh Chin Chin, URA's group director for development control, noted: "This will also encourage developers to provide a more balanced mix of unit sizes to cater to the diverse needs of home buyers, including large families."

Meanwhile, after once encouraging developers to provide balconies to residents, the URA has addressed feedback that some balconies are "oversized" and that some home buyers find it challenging to find units without balconies.

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.

The URA also introduced a new bonus GFA scheme to encourage developers to provide more indoor recreation spaces such as gyms, libraries, function rooms and reading rooms to residents. The new scheme provides bonus GFA capped at 1 per cent of total area (or the GFA of the residential component for mixed-use developments).

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