New Reporter
08-01-24, 10:20
Residential rents easing from pandemic highs but unlikely to give up all gains
Slowdown in leasing demand, spike in new home completions will put downward pressure on rents in 2024
Jan 08, 2024
THE surge in Singapore housing rents to record highs in 2023 is starting to ease, but rents are unlikely to fall back to pre-pandemic levels anytime soon.
Slower leasing demand and tenant resistance to peak pricing, coupled with a spike in supply from record home completions, will put downward pressure on rents, analysts said. Landlords, however, are unlikely to back down by much as their costs remain elevated.
Private residential rents are up 11.1 per cent in the first nine months of 2023, after jumping 29.7 per cent in 2022, according to the Urban Redevelopment Authority’s rental index. The 2022 surge added to a 9.9 per cent rise in 2021.
https://i.imgur.com/wSTUIIQ.png
Rents for public housing flats have escalated similarly, and were up 8.8 per cent in the first three quarters of 2023, following a 28.5 per cent gain in 2022.
But month on month, condominium rents have been declining since August, data tracked by 99.co and SRX showed. Condo rents slipped 1.4 per cent in November, marking the fourth straight month of decline. Housing and Development Board (HDB) rents have been more or less flat since August, and rose marginally by 0.8 per cent in November.
For the whole of 2023, market watchers expect private residential rents to have risen at least 10 per cent and for rents to remain flat or fall in 2024.
Leasing demand from foreigners has softened as a result of heightened economic uncertainty, a weaker labour market, and dampened business sentiment, while local demand has also eased following a surge in new home completions, said Chia Siew Chuin, JLL head of residential research, research and consultancy.
Almost 40,000 new homes across the public and private housing markets are expected to be completed in 2023, the highest level in the last five years.
Chia noted that the third quarter’s 0.8 per cent rise in rents was the slowest quarterly rise since the 0.1 per cent gain in Q4 of 2020 “when Singapore was still reeling from the pandemic”. Year on year, the volume of leasing transactions fell 9.8 per cent in Q3 2023 as high asking rents curbed commitments. The recent slowdown “signals a strengthening tenant’s market, as housing options have expanded with increased project completions”.
“Amid inflation, growing caution and a wider selection of leasing options resulting from the spike in new home completions, tenants resisted sky-high rents and sought more affordable options,” Chia said.
Multinational companies based in Singapore have also become more cost-conscious, with economic headwinds blowing in Europe and Asia, said Alan Cheong, Savills Singapore’s executive director of research and consultancy.
“This will cascade down to the number of foreign workers they may wish to harbour in Singapore.”
The number of Employment Pass (EP) holders increased by 10,000 from December 2022 to June 2023, said Lee Sze Teck, Huttons’ senior director of data analytics. “With tepid growth for the rest of 2023, it is highly unlikely that the increase in the number of EP holders in 2023 will come close to 2022’s 25,600.”
Lower growth in the number of EP holders has slowed down tenant demand for private homes in the second half of 2023, Lee added.
Private residential rents could fall in the first half of 2024 as the record completions in 2023 could take a while to digest, said Tricia Song, CBRE’s head of research, Singapore and South-east Asia.
She said: “Rents are expected to start easing over the next few quarters. However, they are unlikely to fall back to pre-2022 levels, due to increased property taxes, higher prices requiring higher returns, higher mortgage payments, and higher rental demand from the newly imposed 15-month wait-out period for downgraders.”
https://i.imgur.com/VHW18yO.png
According to Savills, median rents for a three-bedroom apartment in Q3 2023 ranged from S$4,000 per month in District 28 (Seletar/Yio Chu Kang) to S$9,500 per month in District 1 (Boat Quay/Marina/Raffles Place).
Median HDB rents for a five-room HDB flat in November 2023 ranged from S$3,200 in Bukit Panjang to S$5,400 in the Central Area, data from SRX and 99.co showed.
By sub-market, condos in the Outside Central Region (OCR) could see an increase in rents this year, supported by lower supply, said Christine Sun, senior vice-president of research and analytics at OrangeTee & Tie. OCR rents rose faster than in the rest of the island in 2022, and continued to move up in 2023, while CCR rents have started to fall – by 1.7 per cent in Q3.
The number of completions in the OCR will shrink substantially from around 10,000 units in 2023 to approximately 1,800 units in 2024, Sun said. In comparison, the CCR and RCR will each see close to 4,000 new homes completed.
This year, two new government measures will kick in, aimed at addressing rental demand. From Jan 22, 2024 to Dec 31, 2026, there will be a temporary relaxation of occupancy cap for larger HDB flats and private residential properties. These accommodations will house up to eight persons, up from the current cap of six.
Analysts expect this move to benefit lower-income groups, students, blue-collar foreign workers and large families. But adding two more tenants per unit could lead to higher total rent for the property, causing overall rents to edge up.
Two state land sites in Upper Thomson and Zion Road have also been set aside to pilot long-stay serviced apartments as a new form of short-term rental housing. Tenders will close this year.
Rents are likely to be higher than those of condos as utilities and housekeeping services will be included, said Huttons’ Lee.
Eugene Lim, key executive officer of ERA, said that the new serviced apartment category would have minimal effect on rents in the broader market, but may help to meet demand from expatriates needing short-term stays on their work assignments.
As for the HDB leasing market, OrangeTee & Tie’s Sun expects rents to increase between 1 and 3 per cent in 2024 amid a tighter housing market. Available rental stock is expected to fall sharply.
Some tenants could also be turning to the HDB leasing market due to the higher rents of private homes, said Ismail Gafoor, CEO of PropNex Realty.
Rents for landed homes are also expected to soften in 2024 as buyers will have more choices amid the increased CCR supply, said CBRE’s Song.
Landed residential rents spiked up the most in Q1, by 14.5 per cent quarter on quarter, probably due to the limited stock and increased demand for Good Class Bungalows from ultra-high-net-worth individuals and families, she added.
“The demand has tapered off since the high-profile money laundering bust and sentiment has softened. However, the April 2023 cooling measures which imposed 60 per cent Additional Buyer’s Stamp Duty on foreigners may drive more to rent instead of buy, and this could support some rental demand for landed properties,” Song said.
https://www.businesstimes.com.sg/property/residential-rents-easing-pandemic-highs-unlikely-give-all-gains
Slowdown in leasing demand, spike in new home completions will put downward pressure on rents in 2024
Jan 08, 2024
THE surge in Singapore housing rents to record highs in 2023 is starting to ease, but rents are unlikely to fall back to pre-pandemic levels anytime soon.
Slower leasing demand and tenant resistance to peak pricing, coupled with a spike in supply from record home completions, will put downward pressure on rents, analysts said. Landlords, however, are unlikely to back down by much as their costs remain elevated.
Private residential rents are up 11.1 per cent in the first nine months of 2023, after jumping 29.7 per cent in 2022, according to the Urban Redevelopment Authority’s rental index. The 2022 surge added to a 9.9 per cent rise in 2021.
https://i.imgur.com/wSTUIIQ.png
Rents for public housing flats have escalated similarly, and were up 8.8 per cent in the first three quarters of 2023, following a 28.5 per cent gain in 2022.
But month on month, condominium rents have been declining since August, data tracked by 99.co and SRX showed. Condo rents slipped 1.4 per cent in November, marking the fourth straight month of decline. Housing and Development Board (HDB) rents have been more or less flat since August, and rose marginally by 0.8 per cent in November.
For the whole of 2023, market watchers expect private residential rents to have risen at least 10 per cent and for rents to remain flat or fall in 2024.
Leasing demand from foreigners has softened as a result of heightened economic uncertainty, a weaker labour market, and dampened business sentiment, while local demand has also eased following a surge in new home completions, said Chia Siew Chuin, JLL head of residential research, research and consultancy.
Almost 40,000 new homes across the public and private housing markets are expected to be completed in 2023, the highest level in the last five years.
Chia noted that the third quarter’s 0.8 per cent rise in rents was the slowest quarterly rise since the 0.1 per cent gain in Q4 of 2020 “when Singapore was still reeling from the pandemic”. Year on year, the volume of leasing transactions fell 9.8 per cent in Q3 2023 as high asking rents curbed commitments. The recent slowdown “signals a strengthening tenant’s market, as housing options have expanded with increased project completions”.
“Amid inflation, growing caution and a wider selection of leasing options resulting from the spike in new home completions, tenants resisted sky-high rents and sought more affordable options,” Chia said.
Multinational companies based in Singapore have also become more cost-conscious, with economic headwinds blowing in Europe and Asia, said Alan Cheong, Savills Singapore’s executive director of research and consultancy.
“This will cascade down to the number of foreign workers they may wish to harbour in Singapore.”
The number of Employment Pass (EP) holders increased by 10,000 from December 2022 to June 2023, said Lee Sze Teck, Huttons’ senior director of data analytics. “With tepid growth for the rest of 2023, it is highly unlikely that the increase in the number of EP holders in 2023 will come close to 2022’s 25,600.”
Lower growth in the number of EP holders has slowed down tenant demand for private homes in the second half of 2023, Lee added.
Private residential rents could fall in the first half of 2024 as the record completions in 2023 could take a while to digest, said Tricia Song, CBRE’s head of research, Singapore and South-east Asia.
She said: “Rents are expected to start easing over the next few quarters. However, they are unlikely to fall back to pre-2022 levels, due to increased property taxes, higher prices requiring higher returns, higher mortgage payments, and higher rental demand from the newly imposed 15-month wait-out period for downgraders.”
https://i.imgur.com/VHW18yO.png
According to Savills, median rents for a three-bedroom apartment in Q3 2023 ranged from S$4,000 per month in District 28 (Seletar/Yio Chu Kang) to S$9,500 per month in District 1 (Boat Quay/Marina/Raffles Place).
Median HDB rents for a five-room HDB flat in November 2023 ranged from S$3,200 in Bukit Panjang to S$5,400 in the Central Area, data from SRX and 99.co showed.
By sub-market, condos in the Outside Central Region (OCR) could see an increase in rents this year, supported by lower supply, said Christine Sun, senior vice-president of research and analytics at OrangeTee & Tie. OCR rents rose faster than in the rest of the island in 2022, and continued to move up in 2023, while CCR rents have started to fall – by 1.7 per cent in Q3.
The number of completions in the OCR will shrink substantially from around 10,000 units in 2023 to approximately 1,800 units in 2024, Sun said. In comparison, the CCR and RCR will each see close to 4,000 new homes completed.
This year, two new government measures will kick in, aimed at addressing rental demand. From Jan 22, 2024 to Dec 31, 2026, there will be a temporary relaxation of occupancy cap for larger HDB flats and private residential properties. These accommodations will house up to eight persons, up from the current cap of six.
Analysts expect this move to benefit lower-income groups, students, blue-collar foreign workers and large families. But adding two more tenants per unit could lead to higher total rent for the property, causing overall rents to edge up.
Two state land sites in Upper Thomson and Zion Road have also been set aside to pilot long-stay serviced apartments as a new form of short-term rental housing. Tenders will close this year.
Rents are likely to be higher than those of condos as utilities and housekeeping services will be included, said Huttons’ Lee.
Eugene Lim, key executive officer of ERA, said that the new serviced apartment category would have minimal effect on rents in the broader market, but may help to meet demand from expatriates needing short-term stays on their work assignments.
As for the HDB leasing market, OrangeTee & Tie’s Sun expects rents to increase between 1 and 3 per cent in 2024 amid a tighter housing market. Available rental stock is expected to fall sharply.
Some tenants could also be turning to the HDB leasing market due to the higher rents of private homes, said Ismail Gafoor, CEO of PropNex Realty.
Rents for landed homes are also expected to soften in 2024 as buyers will have more choices amid the increased CCR supply, said CBRE’s Song.
Landed residential rents spiked up the most in Q1, by 14.5 per cent quarter on quarter, probably due to the limited stock and increased demand for Good Class Bungalows from ultra-high-net-worth individuals and families, she added.
“The demand has tapered off since the high-profile money laundering bust and sentiment has softened. However, the April 2023 cooling measures which imposed 60 per cent Additional Buyer’s Stamp Duty on foreigners may drive more to rent instead of buy, and this could support some rental demand for landed properties,” Song said.
https://www.businesstimes.com.sg/property/residential-rents-easing-pandemic-highs-unlikely-give-all-gains