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Should You Invest In a Shoebox Home?

For most Singaporeans, the only way one can live in the Core Central Region (CCR) of Districts 9, 10, 11 and parts of the business districts, is to buy a shoebox unit.


A shoebox unit is normally meant for single occupancy, as the size is approximately 500 sqft or less. These units have a lower selling price due to its small size but on a per sqft basis, it may be on par with regular size condos. So are shoebox units a good investment? According to URA data, over the past 10 years, condo prices broadly appreciated 40% from an average of $1,170 psf to $1,640 psf. Shoebox units, on the other hand, appreciated only about 30%, from $1,340 psf to $1,770 psf. However, during the same period, shoebox units in the CCR rose by about 35%, from an average of $1,840 psf to $2,480 psf as compared to regular condos, which appreciated about 27%, from an average of $1,740 to $2,210.


Let’s look at some factors to consider if you are looking to invest in a shoebox

unit:


1. Lower quantum, higher psf

Because of it’s small size, the cost of owning a shoebox unit is lower as compared to a regular condo. That would translate into a lower downpayment and smaller monthly instalments. On the flip side, you are paying a higher psf. In almost every property market, the smaller the unit, the higher the psf. In fact, most landed properties have a lower psf than shoebox units.


2. Long term vs short term investment

Shoebox units are for single occupancy or young couples due to its small size. So if you are planning to start a family in the near term, it probably would not be a wise investment.


3. Rental yield vs rentability

Lower quantum units generally fetches higher rental yield as rental yield is calculated by dividing annual rental income against cost of the property. However, due to its small size, it may take longer to rent out as renters may prefer a 2 bedder as the rent then can be shared among 2 people.


4. Supply vs Demand

According to URA, as at 2018, there were about 28,000 such units in the market compared to 2,500 in 2012. With new developments like Riverfront, The M and Jervois 38 contributing to the growing number of these units, competition will be tough for rental opportunities.


Ultimately, investing in a property is based on a individual’s needs, requirements,

lifestyle and of course budget.


For available units in the market, simply filter by maximum psf here.


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