The latest property debate on everyone’s lips is about “shoebox” apartments. Are they good or bad? Overpriced or value-for-money? Inhuman or practical? Before we dive into all that, let’s just do a quick definition of “shoebox”, otherwise known as “mickey mouse”, apartments.

These terms describe a residential apartment that has less than 500 square feet, or roughly 46 square metres, of built-in area. Comparatively, a typical 3 or 4-bedroom HDB flat, or a mid-sized private apartment, would be two or three times that. Also, they may be small, but they should include basic facilities such as a bedroom, bathroom and kitchenette.


Now that we know what they are, we should look at the who, and why. Obviously, these shoebox units are not meant for large or extended families. A family of three with a young infant might be able to make do by having the crib in the bedroom, but that is probably the practical limit of occupancy. Families with more members or older children would definitely find conditions cramped, maybe even hellish. This niche product is thus relegated to singles or couples - occupants that are content with the single bedroom.

But why would such people choose to live in such a place? Do these shoebox units truly serve a purpose in the housing landscape here? Consider the single professional, perhaps local, or perhaps from another country. They might not need, or even want, a large apartment, let alone one with more than one bedroom. A smaller kitchenette is also a better fit for a single person. Now consider a young, newlywed couple. They might not want, or be able, to afford a full-fledged apartment; HDB flats lack facilities and have waiting periods measured in years. For both these groups, a smaller space is easier to clean and maintain - always a plus point to young, busy professionals with an active social life.

Singapore’s social landscape is changing, for better or worse. We have more foreign professionals, more singles opting to live separately from parents, more unmarried singles and more married couples opting to delay having children. All these add up to a growing niche segment for shoeboxes. That qualifies them for a place in our property market, wouldn’t you say?

As such, shoebox apartments are a good fit for this signicant, and increasingly important, segment. Having an outright ban on such apartments would leave a void that cannot be filled, especially with the property prices we are seeing of late. We feel that a much looser lower size limit is needed, perhaps even under 300 square feet. The market should decide what is a “hell-hole”, not some arbitrary limit set by the government. After all, who is the best person to judge, if not the one who is fully immersed in the lifestyle? Restrictions, if any, should be focused not on the definition of what is allowed, but instead on how they will be used, proper allocation of such units, and curbs on speculators and investors.

Which brings us to the point of the problems being caused by these shoebox units. They do serve a purpose, and in fact, they serve so well that they have become victims of their own success. Originally envisioned as a lower-(absolute)-cost, limited-functionality alternative to starter units such as HDB flats and smaller, older apartments, investors quickly realised their potential and started throwing money into the pot. This, of course, inflated prices and attracted opportunistic speculators. As prices spiralled upwards, developers themselves started to take notice, and poured money into plans for more such units. At this point, this product’s outlook seems buoyed on just speculation and euphoria alone. A low-cost, limited-reach but functional niche product is now suffering from spiralling costs and future oversupply for its niche. At this rate, it will not be functional for its niche. Basic supply and demand rules predict a recipe for disaster.

Unfortunately, it gets worse. This cycle – of buyers’ frenzy prompting developers to build more, thus generating more buyers’ frenzy - is affecting not just this niche market. Unsavvy buyers, seeing the past cycle’s success, willingly pay greater premiums to developers. This prompts developers to build more and charge even higher premiums (on a per-square-foot basis). As long as this pool of unsavvy liquidity is large, developers will simply keep milking it more and more. But the land has to come from somewhere, and when developers compete for land to build such units, prices will inflate across the board.

Moreover, when the prices of such “low-end” units go up, the rest of the market will experience upward pressure as well. If I see the owners down the road selling their shoebox unit for SGD1 million, how can I justifiably sell my 3-room for SGD1.2 million? When shoebox unit prices close in on small apartment prices, buyers will flock to small apartments as better value-for-money. This demand will cause small apartment prices to go up. This wave of price increases will carry on until the top-end of the market. So in addition to external pressures from foreign money, this shoebox “mini-bubble” is also causing upward pressure on our property market.

But simply banning the product outright would be detrimental to consumer choice, and wouldn’t really be addressing the issue anyway. In the 1980s and 90s, many housewives and students got burned badly while playing penny stocks. Low barrier to entry, unrealistic expectations of quick and easy gains, euphoric sentiment and a general lack of investment fundamentals caused quite a few personal disasters amongst this group of investors. Did we ban penny stocks outright? Would that have been the proper response? In short, no. So why this sentiment against shoebox units, when they clearly serve a niche role in our current socio-economic climate?

Instead, the key issue to address is the investment culture. While it’s good for society in general to have a healthy interest in investment, such a thing cannot be forced. It requires proper training, and much analysis. Inspiring small investors to take risks, without properly understanding said risks, will cause the same mistakes to repeat. Like the penny stock debacle, the current shoebox fever is fueled by over-optimism in the market. Like the penny stock investors, shoebox investors are not looking at the fundamentals. Like the penny stock market, the shoebox is quickly reaching saturation, with investors paying too much for a product with limited actual value and hidden pitfalls. And finally, like the penny stock situation, the potential for everyday people to lose the shirt off their backs is huge.

As much as we questioned the usefulness of education in previous initiatives (for example, in the case of domestic worker death falls), we think that education is a key part of the solution here. One need only look at the recent Facebook Initial Public Offering to see that, despite this uncertain economic climate (or perhaps, because of it?) there are still people willing to throw huge amounts of money at dubious investment prospects. I bet many of those Facebook investors are wishing they had listened to all the nay-sayers now.

While we don’t support doing nothing, we also cannot see how a ban would be useful. Between an outright ban and not doing anything, there must be some middle ground for policies to be implemented, both from developer side as well as the investor and consumer side.

Stay tuned for more on our say about shoebox units, and feel free to leave your opinion too!



  One Response to “The Great Shoebox Debate”


    The raw material binlduig cost of a house is a small portion of the price.If anyone beleives that 150 or 200k is not enough to build a decently size home, then one must rethink the value of things.Raw materials haven’t been multiplied by 10 in the last 20 years, but house prices have In addition, I don’t know anyone who likes the cosiness of a home that is too small to even have decent storage or space to move arround.Finally, UK might be a small country, but the foot print of an apartment/house is negligible to the size of the country, so there is space to have slightly bigger homes, just build higher or less cramped.Driving around the country, I am yet to see a pile up of properties like in Singapore.All this is a way from businesses to squeeze more pennies from buyers, keep the prices of land and homes artificially high, increase their revenue to the expense of the quality of living and have a legitimate reason for doing so.

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