Shoebox units to nearly quintuple by 2015: Minister Khaw

Monstrous growth looms ahead but rental market remains untested, says OCBC.

According to Minister of National Development Khaw Boon Wan, there are ~2.5k completed shoebox units in the market currently, 80% of which are in the central region. He expects the number of completed shoebox units to leap to 9,700 by 2015.5 OCBC estimate that the number of OCR shoebox units could grow more than 450% by 2015.

OCBC release says due to a limited amount of completed units, the rental market for OCR shoebox units is yet untested. One key risk, according to them, is that buyers of uncompleted units in the primary market are basing their decisions on rentals levels today, which may be skewed upwards by a small completed supply.

"If rental levels fall due as supply spikes dramatically after 2015, then capital values are likely to face corresponding downward pressure. This is particularly so if interest rates start to increase as well, reversing the virtuous cycle of liquidity fueled demand," OCBC says.