Singapore Cracks Down on ‘Shoe-Box’ Units in Blow to Developers

(Bloomberg) -- Singapore has cracked down on the number of “shoe-box sized” apartments developers can build, in another blow to profitability.

New guidelines on unit size effectively cut the maximum number of apartments allowed in developments by 18 percent. The changes will affect projects outside the city-state’s central area and come into effect early next year, the Urban Redevelopment Authority said in a statement Wednesday.

The changes are aimed at curbing the reduction in apartment sizes and easing strain on local infrastructure, the URA said. The move, coming after the government rolled out further property market curbs in July, may also crimp developers’ margins and could push down land prices, analysts said.

“The new guidelines reduce developers’ leeway to prop up profit margins by launching smaller units,” said Christine Li, head of research for Singapore at Cushman & Wakefield Inc.

Shares of City Developments Ltd., Singapore’s second-largest developer, fell as much as 1.7 percent in early trading. UOL Group Ltd. slid as much as 2.1 percent and Oxley Holdings Ltd. dropped 1.6 percent.

The move could also further damp the “en-bloc” market, where a group of owners band together to sell entire apartment buildings. Under the latest curbs, the government raised the additional buyer’s stamp duty to 30 percent for developers, making it more expensive to buy and redevelop older properties.

“Even before the dust from the July cooling measures has settled, the government is revising guidelines that would be a further blow to developers,” Michael Lim, an analyst at UBS Group AG, said in a note to clients.

©2018 Bloomberg L.P.