Policy measures targeting shoebox units cannot be ruled out

Shoebox units now accounting for 27% of total sales as of 1Q12, up from just 15% in 4Q11, raised the alarm.

According to UOB Kay Hian, sales volumes for May eased 32% mom after a robust four months as more buyers moved to the secondary market in view of the widening price gap.

Prices across some of the past launches also have moderated by 2-5%, with the effect being more pronounced in high-end/luxury segment projects. Notable mom slowdown in median prices for May was seen by D’Leedon (-7% mom), The Scotts Tower (-6% mom) and The Nautical (-5% mom).

Shoebox units’ share of sales volumes also fell to 13% vs 27% in 1Q12.

UOB said that the moderation of prices and volumes reduces the risk of additional severe policy measures at this juncture. However, policy measures targeting property segments cannot be ruled out as the
low liquidity environment has artificially fuelled investment demand for smallersized units (<S$1m).

"During 1Q12, despite the overall price fall, mass-market prices remained resilient with a 1.1% qoq increase (4Q11: +0.6% qoq). This was mainly due to the rising popularity of small units (less than 50sqm) which accounted for a staggering 27% of total sales (4Q11: 15%). This has prompted National Development Minister Khaw Boon Wan to raise alarm bells and comment that the government will monitor these developments closely and will not hesitate to take appropriate action," said UOB.

Possible measures, it said, include restricting the proportion of shoebox units in the upcoming land sales or disallowing units below a specific size.