Shoebox units lift Q2 demand for rental homes

SINGAPORE - RENTAL demand for homes continued to strengthen in Q2, driven by a surge in interest in shoebox units.

According to data from Square Foot Research, a total of 12,352 rental contracts in the non-landed private residential market were reported in Q2, up 11.6 per cent from a year ago.

In the first six months of this year, a total of 22,937 rental contracts were signed, a 10.2 per cent rise compared with the previous year.

Providing a breakdown, Square Foot Research noted that while shoebox units have the lowest market share of 3.3 per cent, the segment accounted for as much as 26 per cent of the total rental growth from H1 2012 to H1 2013.

Rental demand for shoebox units, defined as units ranging from 300 to 500 sq ft, rose 93 per cent to 748 contracts in H1 2013.

The second-best performer was units in the 500 to 800 sq ft range. Some 2,663 units in this range were rented, up 11 per cent from a year ago.

The surge in interest is mostly attributed to new shoebox units completed in H2 2012, which contributed 55 per cent of the total shoebox demand in the period, and 35 per cent of total shoebox rental demand in H1 2013.

Within the shoebox units segment, location, too, played an important role in the popularity of the units.

Generally, units in the core central region (CCR) had a higher take-up rate (65 per cent) compared with those in the outside central region (52 per cent).

In the CCR, the take-up rate for new projects in districts nine and 10 was strong. Vivace, for instance, recorded a 91.9 per cent take-up rate for its shoebox units, based on the number of rental contracts signed versus the estimated number of such units available. Average rent commanded was about $3,340 per month.

In the OCR, Suites@East Coast enjoyed a a rental take-up rate of 68.6 per cent, at an average rental of $2,320 per month. Siglap V, which entered the market only this year, achieved a rental take-up rate of 63.2 per cent for its shoebox units.

Over in the rest of central region (RCR), Centra Suites and Centra Studios - both projects are located in district 14 - clocked rental take-ups of 87.9 per cent and 81.3 per cent, respectively.

A total of six new projects with shoebox units have been completed since 2012 in district 14, with an average take-up rate of 65.8 per cent in H1 2013.

Rental demand is likely to remain buoyant as prospects in the job market stay positive here, and demand will be further fuelled by the restrictions imposed on residential property purchases by permanent residents and foreigners, said Square Foot Research.

"However, with the record-high number of projects completing in 2014-2015, the surge in overall supply may drive rents down, offering tenants a greater variety of choices beyond shoebox units at increasingly competitive rental prices. This may ultimately affect the draw towards shoebox units," it said.

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