There is no official definition to what constitutes a shoebox apartment.
But the general consensus in the real estate industry is that any apartment that is less than 500 square feet would be categorized as a shoebox apartment.
Those who are more generous would expand the classification to apartment units that are up to 50 square meters (538 square feet).
Sometimes also referred to as Mickey Mouse apartments, the classification of shoebox apartments override any properties that are considered mass market property or luxury property.
This means that no matter if an apartment was sold for $5m or $500,000, it would still be considered a shoebox apartment unit if it has a floor area of less than 500 square feet.
They can also be called studio apartments.
Proliferation of shoebox apartments
Such small sized homes were literally unheard of in the early 2000s even with the scarcity of land in Singapore.
But it quickly became a trendy type of property as Singapore real estate demand reached a fever pitch.
Property prices were hitting new high every month and developers were happily struggling to build enough homes that sell out within weeks of launch.
Demand for private property became so high that investors and second home buyers were willing to snap up anything that was on the market.
Sub-sales speculation didn’t help the situation at all.
It soon became clear that a huge buying decision criteria that less new property investors base their investing on was affordability rather then value.
This means that if a private property was within their budget, it matters little that the price per square feet compared to luxury property makes the latter look like an entry level investment.
Developers, which are understandably profit-driven, then start to plan and build hundreds of small apartment units to sell to the mass market.
These small homes were typical below 500 square feet with 1 bedroom.
They were priced at the high end when observed from a dollar per square feet perspective. But because of the low floor area, the total price still fell within the budgets of the average real estate investor.
It’s no exaggeration to say that they were selling like hotcakes.
An underlying reason for this surge in demand was that private property and resale HDB prices were increasing at an alarming rate.
People who were sitting on the fence genuinely fear that if they don’t invest their cash at that period in time, then private property prices would become unaffordable in the near future.
In any case, it was assumed that rental income collected from renting out these small sized apartments to expats would cover the mortgage obligations. In essence, the property would pay for themselves.
The real profit would be made from capital gains via appreciation of property value.
Government enters the fray
One of the objective of the Ministry of National Development (MND) is to plan and provide adequate housing to the people.
The agency started to issue warnings of how the speed and volume of building such properties contradicts public interest.
For example, infrastructures like roads might not be able to efficiently handle such a huge number of residents that are cramped into developments.
Development rules started to be implement on newer developments to curb the excess supply of such small sized apartments.
It was later found that most buyers of shoebox apartments were HDB owners. And they could potentially trapped in these investments since the resale value is not that strong.
This especially when developers are continue to build more.
This only reinforces the need to implement more control measures on the proliferation of shoebox apartment. Especially in non-city areas.
Because there seemed to be genuine demand for smaller apartments, HDB introduced the 2-room flexi flat in 2016.
They typically come in 2 sizes of 36 sm and 45 sm.
This means that they are also considered as shoebox apartments.
The big difference is that they cost less than half of what private developer are pricing theirs.
