SINGAPORE — From Jan 17 next year, the maximum number of units allowed in new private housing projects in the heartlands will be reduced — effectively deterring developers from building an excessive number of shoebox units.

Under new guidelines announced by the Urban Redevelopment Authority (URA) on Wed (Oct 17), several new areas — including Marine Parade, Balestier and Loyang — will also be subject to more stringent requirements due to the severe strain which the “cumulative effect of new developments” could pose on local infrastructure.

URA first unveiled the guidelines in 2012 to “moderate the excessive development of shoebox units”. The tightening comes as the authorities observed shrinking dwelling unit sizes in new private housing projects.

Ms Goh Chin Chin, Group Director for Development Control at URA, said that the revised guidelines will help to manage potential strains on local infrastructure and safeguard the liveability of residential estates.

"This will also encourage developers to provide a more balanced mix of unit sizes to cater to the diverse needs of homebuyers, including large families," added Ms Goh.

URA currently sets the maximum permissible number of housing units for a development outside the central area by dividing the development's proposed building gross floor area by 70 sq m. Under the new guidelines, it will be divided by 85 sq m, and 100 sq m for a total of nine areas.

These areas are Marine Parade, Joo Chiat-Mountbatten, Telok Kurau-Jalan Eunos, Balestier, Stevens-Chancery, Pasir Panjang, Kovan-How Sun, Shelford and Loyang. Currently, only four areas — Telok Kurau, Kovan, Joo Chiat and Jalan Eunos — are subject to stricter guidelines.

Mixed-use developments will also have to comply with the rules. Developers are encouraged to vary the sizes of the housing units that they propose in a development to cater to the diverse needs of the market, URA had previously said.

In 2012, then-National Development Minister Khaw Boon Wan cited the example of the Telok Kurau area which had experienced “a rampant development of tiny shoebox units... resulting in disamenities such as severe traffic congestion, shortage of car parks and double-parking”.

“After consulting with the stakeholders, URA decided to move in, but in a judicious way, without over-regulating or stifling the creativity of developers,” Mr Khaw said.

URA said that since 2012, it has continued to monitor the distribution of unit sizes in each development to cater to different needs, as well as the number of new developments in certain areas which can cause considerable strain on local infrastructure.

While the formula sets the limit on the number of dwelling units, the actual number that can be supported in any development will be assessed based on the site context, existing site conditions, and the impact on the local infrastructure, URA reiterated.

It will also assess the “overall layout, design and unit sizes of the development proposals, and may add other requirements where necessary to protect the quality of the living environment”.

Analysts told TODAY the new guidelines again show that the government is monitoring the property sector closely, and is prepared to make policy adjustments when necessary.

In July, the Government announced numerous cooling measures in the form of tighter borrowing limits and higher stamp duty rates after private home prices rose more than 7 per cent in the first six months of the year.

Knight Frank Singapore's head of research Lee Nai Jia said that the trend of shoebox units getting smaller had to "come to a stop" to prevent a surplus.

Agreeing, Mr Desmond Sim, CBRE head of research for Singapore and Southeast Asia, noted that unit sizes of recent developments are getting smaller.

Smaller units tend to command higher per square foot prices, and can therefore be more lucrative for developers to build and sell.

Buyers of such units are typically drawn by their lower absolute price compared to bigger units.

Mr Ong Teck Hui, national director for research and consultancy at JLL, said that the increase of the average unit size of 70 sqm to 85 sqm will generally result in “a lower number of units being built in a residential project, as well as units having bigger floor areas”.

"This is likely to have the effect of reducing the average selling price (in psf terms) of a residential project. With an increased floor area, the psf sale price of an apartment or condominium will also be lower as the developer will try to maintain an affordable absolute price for the unit."

This, in turn, will moderate the trend of rising prices, Mr Ong added.

The Real Estate Developers' Association of Singapore (Redas) said that the new guidelines could affect buyers who prefer smaller apartments.

"Developers build based on market demand to cater to the diverse needs of all segments of the market. They are building less smaller dwelling unit sizes in new private housing projects as demand for such units has reduced over the years," a Redas spokesman said on Thursday in response to TODAY's queries.

"Notwithstanding this, with the new guidelines, developers have to build bigger units which may affect the affordability of people who want to retire and downsize and millennials who want smaller dwelling units and flexible living."