New Reporter
26-02-24, 08:58
Residential rents may bottom in H2 2024 before recovering on supply lag, better economic growth
Gross rental yields have improved as rental growth outpaces prices; Woodlands and Jurong outperform
Mark Yip and Lee Sze Teck
Feb 22, 2024
IT WAS a tale of two halves for the residential rental market in 2023. In the first half of 2023, demand for private non-landed homes held up well against the completion of nearly 7,000 units, coming after an almost 30 per cent surge in rents in 2022.
Rents rose 6.2 per cent in the first quarter of the year, although signs of deceleration surfaced in the next quarter. Landlords were taking longer to find a tenant. Coupled with the quiet job market, gains in private property rents eased for three quarters in a row to 2.3 per cent in the second quarter of 2023.
Some of the larger non-landed residential projects completed in H1 2023 include Affinity at Serangoon (1,052 units), Avenue South Residences (1,074 units), Kent Ridge Hill Residences (548 units), Riverfront Residences (1,472 units), Riviere (455 units) and The Woodleigh Residences (667 units).
Market conditions turned in the second half of 2023. A sharp spike in completions of more than 12,000 private non-landed homes was met with a slowing employment market in H2. Rents in the third quarter flattened, with growth at 0.2 per cent. In the fourth quarter, rents contracted for the first time since Q4 2020 by 1.8 per cent.
Amber Park (592 units), Dairy Farm Residences (460 units), Kopar at Newton (378 units), Leedon Green (638 units), Midwood (564 units), Normanton Park (1,870 units), Parc Clementis (1,468 units), Sengkang Grand Residences (680 units), The Florence Residences (1,410 units), The M (522 units) and Treasure at Tampines (2,203 units) were among the larger non-landed residential projects completed in H2 2023.
The Core Central Region (CCR) was the region most affected, with rents declining for two straight quarters in Q3 and Q4 2023. The steep rise in rents since 2021 displaced priced-out tenants to the Rest of Central Region and Outside Central Region, resulting in the number of vacant homes in the CCR rising to 8,494 as at Q4 2023.
For the year 2023, rents of private non-landed homes rose 6.9 per cent, a far cry from the near 30 per cent increase in 2022.
Where rents fell most, and rose highest, in H2 2023
Median gross rents edged down for two straight quarters in Q3 and Q4 of 2023 in seven districts. District 21 (Upper Bukit Timah, Clementi Park, Ulu Pandan), District 4 (Telok Blangah, Harbourfront) and District 26 (Upper Thomson, Springleaf) showed the biggest declines.
In District 21, median gross rents dropped 2.9 per cent in Q3 and 8 per cent in Q4 to S$4.10 per square foot (psf) per month. This was likely due to an influx of new supply of private non-landed homes and displacement of tenants to other districts.
District 4 median gross rents fell 5.7 per cent in Q3 and 1.1 per cent in Q4 to land at S$5.28 psf per month. While there was an increase in the number of private non-landed homes rented out in Sentosa, homes in the area tend to be bigger and median gross rents on a psf basis tend to be lower than smaller units, contributing to the overall decline.
Median gross rents in District 26 also fell back, by 4.8 per cent in Q3 and 1.8 per cent in Q4 to S$3.48 psf per month. Projects in District 26 tend to be older, and property age might have had an impact on rents.
On the other hand, rents in two distinct areas jumped significantly in H2. District 25 (Kranji, Woodgrove) median rents of private non-landed homes climbed 16.5 per cent to S$4.61 per month, while the District 22 (Jurong) median rose 10.3 per cent to S$4.92 psf per month in H2 2023. Lack of new supply supported rents in these locations, while Woodgrove estates typically already have strong demand due to their proximity to the Singapore American School.
In the years from Q4 2018 to Q4 2023, rents jumped 54.7 per cent while prices rose by less – 32.3 per cent. With rental growth outpacing capital values, estimated gross rental yields of private non-landed homes generally improved across the island.
https://i.imgur.com/gkxKaol.png
Based on Huttons’ estimates and calculations, District 25 (Kranji, Woodgrove) stood out with an estimated 5 per cent gross rental yield as at Q4 2023. This was followed by District 22 (Jurong) at 4.5 per cent, and District 2 (Anson, Tanjong Pagar) and District 8 (Little India) at 4.2 per cent.
Expected to move higher
The private residential non-landed rental market may have wobbled on its feet in H2 2023, but rents are forecast to move higher in the next few years, on the back of lower supply.
In H1 2024, rents may stay weak as the market absorbs the excess private non-landed homes. The supply of private non-landed homes in 2024 is estimated to be 9,636 units, half of 2023’s 19,390 units. Average annual supply is estimated to be 6,789 units from 2024 to 2028, lower than the annual average of 8,119 units in the previous five years.
https://i.imgur.com/oFtixu1.jpeg
Tenant demand may pick up on the back of better economic growth in 2024. Thus, the rental market should bottom in H2 2024 and recover subsequently.
A new category of long-stay serviced apartments was recently introduced to help meet short-term supply needs. Such accommodation is unlikely to be in direct competition with standard leases offered by private property owners. Utilities and housekeeping services are usually part of the package offered by serviced apartment operators, who also bear maintenance costs, which will keep serviced apartment rents above standard residential leasing rates.
The government also announced a temporary relaxation of the occupancy cap for larger dwelling units – from Jan 22, 2024, till Dec 31, 2026 – to address the supply crunch. But landlords will take into account higher property taxes they have to pay after tax rates were recently raised, as well as potentially more wear and tear due to housing more occupants. Tenants will have to consider the inconvenience of sharing the bathrooms, living and dining areas with more people. Hence it is likely that the impact is minimal.
Among the various districts in Singapore, District 25 (Kranji, Woodgrove) may continue to do well in the next few years, as there has been no new supply of private non-landed homes in the area since 2015.
The Johor-Singapore Special Economic Zone is in the pipeline, and the completion of the Rapid Transit System in 2026 may strengthen economic connectivity between Johor and Singapore. As a result, more businesses may set up operations in Woodlands and Johor, spurring the development of Woodlands Regional Centre and demand for homes in District 25. This may set the stage for sustained growth in rents and capital appreciation.
Investors may want to keep an eye on an upcoming new project launch along Champions Way in Woodlands in 2024.
Mark Yip is chief executive, and Lee Sze Teck is senior director of data analytics, at Huttons Asia
https://www.businesstimes.com.sg/property/bt-property-week-2024/residential-rents-may-bottom-h2-2024-recovering-supply-lag-better
Gross rental yields have improved as rental growth outpaces prices; Woodlands and Jurong outperform
Mark Yip and Lee Sze Teck
Feb 22, 2024
IT WAS a tale of two halves for the residential rental market in 2023. In the first half of 2023, demand for private non-landed homes held up well against the completion of nearly 7,000 units, coming after an almost 30 per cent surge in rents in 2022.
Rents rose 6.2 per cent in the first quarter of the year, although signs of deceleration surfaced in the next quarter. Landlords were taking longer to find a tenant. Coupled with the quiet job market, gains in private property rents eased for three quarters in a row to 2.3 per cent in the second quarter of 2023.
Some of the larger non-landed residential projects completed in H1 2023 include Affinity at Serangoon (1,052 units), Avenue South Residences (1,074 units), Kent Ridge Hill Residences (548 units), Riverfront Residences (1,472 units), Riviere (455 units) and The Woodleigh Residences (667 units).
Market conditions turned in the second half of 2023. A sharp spike in completions of more than 12,000 private non-landed homes was met with a slowing employment market in H2. Rents in the third quarter flattened, with growth at 0.2 per cent. In the fourth quarter, rents contracted for the first time since Q4 2020 by 1.8 per cent.
Amber Park (592 units), Dairy Farm Residences (460 units), Kopar at Newton (378 units), Leedon Green (638 units), Midwood (564 units), Normanton Park (1,870 units), Parc Clementis (1,468 units), Sengkang Grand Residences (680 units), The Florence Residences (1,410 units), The M (522 units) and Treasure at Tampines (2,203 units) were among the larger non-landed residential projects completed in H2 2023.
The Core Central Region (CCR) was the region most affected, with rents declining for two straight quarters in Q3 and Q4 2023. The steep rise in rents since 2021 displaced priced-out tenants to the Rest of Central Region and Outside Central Region, resulting in the number of vacant homes in the CCR rising to 8,494 as at Q4 2023.
For the year 2023, rents of private non-landed homes rose 6.9 per cent, a far cry from the near 30 per cent increase in 2022.
Where rents fell most, and rose highest, in H2 2023
Median gross rents edged down for two straight quarters in Q3 and Q4 of 2023 in seven districts. District 21 (Upper Bukit Timah, Clementi Park, Ulu Pandan), District 4 (Telok Blangah, Harbourfront) and District 26 (Upper Thomson, Springleaf) showed the biggest declines.
In District 21, median gross rents dropped 2.9 per cent in Q3 and 8 per cent in Q4 to S$4.10 per square foot (psf) per month. This was likely due to an influx of new supply of private non-landed homes and displacement of tenants to other districts.
District 4 median gross rents fell 5.7 per cent in Q3 and 1.1 per cent in Q4 to land at S$5.28 psf per month. While there was an increase in the number of private non-landed homes rented out in Sentosa, homes in the area tend to be bigger and median gross rents on a psf basis tend to be lower than smaller units, contributing to the overall decline.
Median gross rents in District 26 also fell back, by 4.8 per cent in Q3 and 1.8 per cent in Q4 to S$3.48 psf per month. Projects in District 26 tend to be older, and property age might have had an impact on rents.
On the other hand, rents in two distinct areas jumped significantly in H2. District 25 (Kranji, Woodgrove) median rents of private non-landed homes climbed 16.5 per cent to S$4.61 per month, while the District 22 (Jurong) median rose 10.3 per cent to S$4.92 psf per month in H2 2023. Lack of new supply supported rents in these locations, while Woodgrove estates typically already have strong demand due to their proximity to the Singapore American School.
In the years from Q4 2018 to Q4 2023, rents jumped 54.7 per cent while prices rose by less – 32.3 per cent. With rental growth outpacing capital values, estimated gross rental yields of private non-landed homes generally improved across the island.
https://i.imgur.com/gkxKaol.png
Based on Huttons’ estimates and calculations, District 25 (Kranji, Woodgrove) stood out with an estimated 5 per cent gross rental yield as at Q4 2023. This was followed by District 22 (Jurong) at 4.5 per cent, and District 2 (Anson, Tanjong Pagar) and District 8 (Little India) at 4.2 per cent.
Expected to move higher
The private residential non-landed rental market may have wobbled on its feet in H2 2023, but rents are forecast to move higher in the next few years, on the back of lower supply.
In H1 2024, rents may stay weak as the market absorbs the excess private non-landed homes. The supply of private non-landed homes in 2024 is estimated to be 9,636 units, half of 2023’s 19,390 units. Average annual supply is estimated to be 6,789 units from 2024 to 2028, lower than the annual average of 8,119 units in the previous five years.
https://i.imgur.com/oFtixu1.jpeg
Tenant demand may pick up on the back of better economic growth in 2024. Thus, the rental market should bottom in H2 2024 and recover subsequently.
A new category of long-stay serviced apartments was recently introduced to help meet short-term supply needs. Such accommodation is unlikely to be in direct competition with standard leases offered by private property owners. Utilities and housekeeping services are usually part of the package offered by serviced apartment operators, who also bear maintenance costs, which will keep serviced apartment rents above standard residential leasing rates.
The government also announced a temporary relaxation of the occupancy cap for larger dwelling units – from Jan 22, 2024, till Dec 31, 2026 – to address the supply crunch. But landlords will take into account higher property taxes they have to pay after tax rates were recently raised, as well as potentially more wear and tear due to housing more occupants. Tenants will have to consider the inconvenience of sharing the bathrooms, living and dining areas with more people. Hence it is likely that the impact is minimal.
Among the various districts in Singapore, District 25 (Kranji, Woodgrove) may continue to do well in the next few years, as there has been no new supply of private non-landed homes in the area since 2015.
The Johor-Singapore Special Economic Zone is in the pipeline, and the completion of the Rapid Transit System in 2026 may strengthen economic connectivity between Johor and Singapore. As a result, more businesses may set up operations in Woodlands and Johor, spurring the development of Woodlands Regional Centre and demand for homes in District 25. This may set the stage for sustained growth in rents and capital appreciation.
Investors may want to keep an eye on an upcoming new project launch along Champions Way in Woodlands in 2024.
Mark Yip is chief executive, and Lee Sze Teck is senior director of data analytics, at Huttons Asia
https://www.businesstimes.com.sg/property/bt-property-week-2024/residential-rents-may-bottom-h2-2024-recovering-supply-lag-better