Big residential sites will brush off new URA regulation

New residential unit cap will have "minimal impact" on GLS in particular.

URA has unveiled a regulation that sets a maximum number of residential units to be built on non-landed private residential sites at Outside Central Region, which will not stymie Government Land Sites (GLS) since developers will still build there based on market demand, according to Knight Frank.

Meanwhile, other developers can still roll out small-sized units in spite of the regulation "as long as there are big units to offset the total size," forcing what could be the new industry standard of maintaining a "good balance of unit size and layouts caterting to all target groups."

Here's more from Knight Frank:

Singapore. Arising from the increasing number of shoe-box units in recent residential development sites, the URA unveiled a regulation on maximum number of residential units to be built on non-landed private residential sites at Outside Central Region. Shoe-box units are perceived to be those smaller than 50 sqm (by URA standard of small units) and 47 sqm (by definition of SRPI NUS).

Monitoring Housing Landscape of Land Scarce Singapore. The latest regulation does not directly control the unit size but cap the maximum number of units to be built. The approach to cap the maximum number of dwelling units using the minimum size of 70sqm as a basis is a fairly efficient approach to fulfil two objectives - to increase the proportion of larger-sized units, while providing the flexibility to provide smaller units in a development. This is also a reflection of the government’s national agenda to create liveable spaces conducive for family building especially in suburban areas. It also ensures a good balance of various housing sizes in new developments in the OCR. In land scarce Singapore, it is important to ensure there is sufficient land supply for all user groups, including investors, singles, expatriates and families.

Controlling the maximum number of housing units in OCR will partially lift the burden on infrastructure. Road and transportation systems in the OCR are not as extensive as in CCR and RCR, and still going under improvement to meet demand of the fast growing population. The reduction in the number of  housing units in the suburban area will prevent overcrowding when people need to travel to the CBD. 

Minimal Impact on Big Residential Sites. We expect the regulation to have minimal impacts on large GLS residential sites, since the number of units to be built is based on market demand. In fact, the average unit size in all the GLS residential sites sold in 2011 (for projects that have been launched or going to be launched) are more than 70 sqm (except for Parc Rosewood at 55.63 sq m). For example, Sky Habitat has a maximum GFA of 58,786 sq m and 509 units which work out to be 115.49 sq m average unit size. Archipelago has average unit size of 110.7 sq m. Eight Riversuites has average unit size of 75.6 sq m. Parc Olympia has average unit size of 86.27 sq m.

In addition, larger land sites could be less affected by the maximum cap, as developers would have been less inclined to build excessive number of units given the existing maximum Project Completion Period of 5 years and higher perceived market risk to clear all units in a development.

Developers can still build small-sized units as long as there are big units to offset the total size. One development cannot accommodate too many units since the market might not be able to absorb all. With proper market studies, developers will ensure that there is a good balance of unit size and layouts catering to all target groups.

We envisage that the measure would impact developments at smaller land sites that are currently at the design planning stage. Developers who have priced these sites with the assumption of higher proportion of smaller units to be built at higher per sq ft prices would have to re-adjust their unit mix and pricing strategies to meet their breakeven costs.

En bloc market will not be affected by this measure, since most of the en bloc sites are in Central Region.