Downturn, downsize

Source : Straits Times - 4 Mar 2009

IN TOUGH times, small is beautiful.

That seems to be the new theme among some developers who are tearing up plans for yet-to-be-launched projects and going back to the drawing board.

They are looking at reconfiguring their residential projects to offer smaller units than planned, so that they would be more affordable for cautious buyers.

This is a major reversal from the boom times when big units were very popular.

In its recent results statement, Sing Holdings said it is reconfiguring the unit sizes and layout of its prime Cairnhill Road project, The Laurels, to adapt to market demand.

‘The plan is to have more one- to two-bedroom units,’ said managing director Lee Sze Hao. ‘Now, I have to be careful with the affordability factor.’ He would offer ‘luxury at a affordable price’.

Wheelock Properties said in its results statement that it is reviewing building plans of its Ardmore 3 project in view of the poor market.

A UOL Group spokesman said as part of its ongoing product development process, it is considering resizing the units of its Green Meadows project in Upper Thomson to make them more affordable.

The impetus for this emerging trend includes the recent stunning sell-out of the Alexis project, which showed that small, affordable units sell. Of its 293 units, 114 units are one-bedders of just 366 sq ft to 527 sq ft.

Before its launch, developer ECPrime said it had adjusted the mix so that a larger number of the units would be smaller and therefore more affordable. Prices started from $450,000 for the one-bedders to about $650,000 for two-bedders.

It was only in 2005 and 2006 that developers were busy looking at building spacious units to cater to the rich. By late 2006, the bigger flats had attracted such strong interest that they were fetching higher prices on a per sq ft basis than smaller units. Traditionally, the bigger the unit, the lower the psf price.

In 2006, Lippo Realty executive director Thio Gim Hock banked on selling fairly big units at its 91-unit Newton One development. It was a success. ‘When the market is good, people go for big units,’ he said. Now, he has moved fast to reconfigure the units at the posh project on the prime Angullia Park site, where The Parisian used to be. It will now have two units per floor, instead of one unit per floor.

‘Last year, we changed our plans. We want to keep it affordable,’ said Mr Thio, now chief executive and group managing director of Overseas Union Enterprise. ‘We foresaw that the market will go for smaller units.’

In the original plan, the 27 units ranged in size from more than 4,000 sq ft to 5,000 sq ft. Now, there will be 50-odd units from around 2,500 sq ft to 3,000 sq ft, he said.

Mr Lee said he started reviewing plans for The Laurels late last year. It will be several more months before the approvals come in and it is ready for launch.

‘Things have changed. It is better to change from business class to economy class now. It is important to build something the market can absorb,’ he said.

‘Gone are the days when these people just walk in and pay you $7, $10 million. Unit sizes have to be scaled down but still remain at a comfortable level.’

The original plan was for The Laurels to have 150 units, many of them three- to four-bedders. Now, it will have about 290 units.

More developers may follow suit, given the downturn. Said DTZ executive director Ong Choon Fah: ‘People look at the lump sum now. The perception is that there is a smaller capital outlay.’

Mr Lee and Mr Thio both believe developers still able to reconfigure project layout and unit sizes will want to do so now.

Added Knight Frank executive director Peter Ow: ‘If the developers have not started selling or building their projects, it would make sense for them to look at resizing the units to make them more affordable, provided it does not affect their planning approvals.

Mr Tai Lee Siang, president of the Singapore Institute of Architects, said: ‘If poor economic conditions persist, the trend is likely to be downsizing of units to make them more affordable. The other trend may be the no-frills approach, where units are made simpler and cheaper to build - thus lowering costs.’