The Urban Redevelopment Authority (URA) introduced a new regulation on October 18 to curb shoebox units in non-landed private residential projects in the central area, and to ensure that units of sufficient size are built to encourage more families to move into the central area.
The URA has stipulated that from January 18, 2023, all condominiums, executive condominiums (ECs), and the residential components of commercial and mixed-use developments within the central area will be required to have at least 20% of their residential units with a minimum area of 70 square meters.
This is because the URA has recognized that “the size of residential units in the central area is continually shrinking,” which conflicts with the planning intention of making the central area an attractive place to live, work, and play.
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The central area covers 11 planning areas, including Outram, Newton, River Valley, Singapore River, Marina South, Marina East, Rochor, Orchard, and the Downtown Core.
The URA stated that to encourage more people to live in the central area, it is necessary to ensure that residential units in the area are of appropriate size and have a balanced distribution to meet the needs of different family sizes and market segments.
Leo Kwek, a senior local real estate agent at AnjiaSG, believes the release of this new regulation is timely.
“‘As of the third quarter of this year, the median size of new residential units in the central area has shrunk from 94 square meters in the third quarter of 2017 to 73 square meters, because the central area was not subject to previous guidelines,’ Leo said.”
Leo said that developers are also likely to maximize land use efficiency to cope with rising land costs.
“‘Without the guidelines issued this time, a large number of small-sized units would likely have continued to appear on the market,’ Leo added.”
In 2018, the URA limited the maximum number of units in new private residential projects outside the central area to address the potential issue of excessive strain on infrastructure.
The minimum average unit size for private residential projects outside the central area was increased from 70 square meters to at least 85 square meters. The new 2018 regulation applied to all projects with new development applications submitted on or after January 17, 2019.
Analysts said the new regulation from last Tuesday is unlikely to have a significant impact on the market, as many new developments in the central area already include large units, and buyers of these units typically have the financial capacity to afford them.
Leo also stated that since the new regulation will lead to a reduction in the construction of small units in the central area, a situation where supply is less than demand may require future buyers investing in such properties to pay more for these smaller units.
Leo stated that the new regulations are unlikely to affect high-end projects. High-end developments typically offer larger and more luxurious units.
“‘However, some smaller-scale projects often feature a higher number of small-sized units to attract buyers with limited budgets. Developers relying on this sales strategy will now have to offer a higher proportion of larger units,’ he said.”
Leo pointed out that the new regulations are unlikely to affect overall property prices in the central area, as 64.3% of new homes sold in the central area in the first three quarters of 2022 were 70 square meters or larger.
Leo suggested that smaller projects in the central area might have to lower their asking prices during a collective sale.
He believes that several collective sale sites in the central area and at Marina Gardens Lane could be affected.
“‘With the increase in the Land Betterment Charge and changes in the calculation of gross floor area, developers’ costs will rise and erode their profits,’ Leo said.”
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