PROPERTY buyers in Asian cities such as Hong Kong, Singapore and Japan have been quicker to embrace designer shoebox apartments than their counterparts in old-world cities such as Sydney, London and New York.
In Singapore, the lure of such apartments - defined as units of below 500 sq ft - comes from their higher per-square-foot values.
A Savills World Research report said shoebox units are worth S$1,547 psf, giving them a 33.5 per cent premium over all non-landed property values.
When rented out, such units command significantly higher rates; the average rent is now above S$6.50 psf a month, versus S$4.20 psf a month for units of between 501 sq ft and 1,500 sq ft.
While the take-up for new shoebox units - which averaged 803 units per quarter in the first half of the year - has been healthy, the supply and sales of such units are expected to wane, with the Urban Redevelopment Authority stepping in to restrict the maximum number of such units on development plans, said Savills.
Demand for these tiny apartments has also risen in Hong Kong in the last few years.
Labelled "boutique luxury residences", these units of between 250 sq ft and 350 sq ft of saleable area have price tags exceeding HK$20,000 (S$3,130) psf.
Given that many of these projects are located in Hong Kong's traditional luxury residential areas, investors can enjoy rental yields of 3 per cent, compared with other luxury residential properties in the same areas, which generate yields of less than this.
In addition, such projects have the potential for value appreciation, given their limited new supply in these areas.
Savills said: "As a result, international funds are now developing shoeboxes in Hong Kong."
Simon Smith, senior director of Savills Research, said the smallness of these homes may not matter.
"In terms of design and layout, a lot has changed over recent years as technological advances have transformed space needs; the 24/7 social infrastructure available in most cities has lessened the number of hours typically spent at home."
Cities in the old world, on the other hand, are still ambivalent about shoebox apartments. Savills cited Sydney as an example; there, lenders remain reluctant to lend against units measuring under 500 sq ft.
London has no direct equivalent of the shoebox model seen in Singapore and Hong Kong, but a developer there called Pocket Living has pioneered the small-apartment market, offering studio flats of between 250 sq ft and 300 sq ft and one-bedroom apartments of between 380 sq ft and 480 sq ft.