Sales of smaller homes increasing

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The Straits Times
Nov 11, 2011
Sales of smaller homes increasing

Buyers downsizing their expectations in face of rocketing prices

By Esther Teo

SMALLER and more affordable homes are being snapped up as buyers confront a booming property market and ever increasing prices.

The Urban Redevelopment Authority index that tracks flat prices rocketed 18 per cent last year and increased 6 per cent in the first nine months of this year, although it inched up just 1.3 per cent in the three months to Sept 30.

That was the eighth consecutive quarter of moderation as a series of cooling measures and economic uncertainty dampened buying sentiment, but prices are still about 16 per cent above their previous peak in the second quarter of 2008.

But even with prices flat-lining, buyers are increasingly lowering their expectations, according to DTZ Research.

It noted that private apartments of less than 1,000 sq ft comprised 41 per cent of all sales in the first nine months of the year - up on 35 per cent last year and 22 per cent in 2007.

DTZ's head of Asia-Pacific research, Ms Chua Chor Hoon, said buyers typically look at the absolute price of a home rather than its per sq ft (psf) price when assessing affordability.

'Hence, new home sizes have become smaller so that the overall quantum still remains affordable for home buyers even while the unit price rises,' she added.

Other experts note that recent land tenders have yielded more units than initially estimated, as builders jump on the shrinking-home bandwagon.

These smaller flats usually have higher psf prices, they add.

Mr Tan Kok Keong, OrangeTee's head of research and consultancy, said apartment sizes have shrunk across most segments.

While suburban three-bedroom units were about 1,000 to 1,100 sq ft a few years ago, they now range from 900 to 1,000 sq ft in newer projects.

DTZ also noted that price increases for completed homes are outpacing uncompleted property this year.

In suburban areas, for example, prices rose 9.2 per cent for completed apartments, but only 4.6 per cent for uncompleted homes in the first nine months. Overall, suburban home prices grew 7.1 per cent.

The expected supply surge of mass market homes stemming from the government land sales programme also slowed price increases, DTZ noted.

DTZ's Ms Chua added that in general, price gains of completed homes could have performed better because of the higher cost of uncompleted units.

Buyers can also appreciate attributes such as views when they see a completed home, and want to occupy or rent out immediately.

OrangeTee's Mr Tan said that healthy rental demand for completed homes might also have boosted their values.

He said occupancy rates for suburban homes have been at more than 95 per cent for the past 18 months at least. This would have led to prices moving upwards in tandem with the healthy rents.

'There is demand for completed homes when the rental market is healthy... But for uncompleted homes, the news flow over the last six months might have led to some people holding back their purchase,' he said.
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