Singapore revises rules to counter 'shoebox apartment' problem

Singapore city
Singapore city Reuters

Singapore has announced stricter guidelines on the maximum number of units in new blocks of private flats and condominiums in a move to tackle what authorities have called "excessive development of shoebox units" in the island-state.

Shares of some real estate firms, including City Developments, UOL Group and Oxley Holdings, fell in Thursday morning trade, underperforming the broader market.

The new rules reduce "developers' leeway to prop up profit margins by launching smaller units," said Christine Li, head of Singapore research at consultancy Cushman and Wakefield.

The guidelines apply to applications for developments outside the city's central area received on or after Jan. 17 next year. They tighten rules first introduced in 2012.

Singapore this year unveiled its strongest property cooling measures in five years, including extra taxes on developers that had been paying record sums to buy land for residential use.

"With the revised guidelines, developers are encouraged to provide a wide range of unit sizes that will cater to the diverse needs of all segments of the market, including larger families," the Urban Redevelopment Authority said in a circular posted on its website on Wednesday.

"The guidelines will also help moderate the reduction in dwelling unit sizes, safeguard the liveability of our residential estates and ensure that the local infrastructure will not be overly strained," it added.

Under the revised rules, the maximum number of dwelling units per development will be calculated by a proposed building's gross floor area divided by 85 square metres, versus 70 square metres under the current rules.

The new guidelines also added more areas of the island where the maximum number of units are calculated by total area divided by 100 square metres.

Cushman's Li estimated that the 85 and 100 square metre limit would reduce the number of units by 18 percent and 30 percent, respectively. Cushman also expected a hit to the redevelopment market, as well as downward pressure on land prices.

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