Private home rents firm amid tight supply, rising expat demand

Rental index rises 1.4 per cent year-on-year in Q4 2019, the highest since 2.1 per cent gain in Q4 2012

Fri, Feb 28, 2020


RENTS of private homes are firming on rising expat demand, and landlords are once again able to charge more after the past few years of sluggish demand.

"Listings are drying up, agents don't have a lot of empty units to show prospective tenants," said a seasoned property agent.

He has managed to get rentals of as much as S$500 higher per month for new leases. This is a far cry from the tepid market of the past two to three years, said the agent who declined to be identified as he was not authorised to speak to the media.

"(I) managed to secure higher rentals last year at University Walk, of S$500 increase which was 7 per cent higher than the previous lease," he said. He also got S$200 and S$100 more for renewals at a unit at 8@ Mount Sophia and a unit at D'Leedon.

"In the past few years, landlords were squeezed by existing tenants" when the leases were due for renewal, and landlords accepted lower rents as "they didn't want the hassle of marketing empty units". he said.

"2019 was another banner year for the private rental market," said Christine Sun, OrangeTee & Tie head of research & consultancy.

According to the Urban Redevelopment Authority (URA), the rental index rose 1.4 per cent year-on-year in Q4 2019. This was the highest since the 2.1 per cent rise in Q4 2012. The increase was mainly driven by the non-landed home segment where rents increased by 1.9 per cent y-o-y.

Based on URA Realis data, rental volume excluding executive condominiums (EC) rose to a 12-year high of 93,920 units in 2019. Leasing volume may be around 91,000 to 94,000 units for 2020, she said.

"The stronger rental prices came on the back of fewer private homes being completed last year and some stock being removed to make way for new housing units," said Ms Sun.

The residential rental market has been performing well on the back of stronger hiring in the services sector such as banking and finance, infocomm and business services, said Christine Li, Cushman & Wakefield, head of research, Singapore and South-east Asia.

For example, the infocomm sector grew 4.5 per cent in the fourth quarter last year, driven by IT and information services segments, she said.

As a result, net employment in the first three quarters of 2019 grew by 5,900 according to department of statistics, said Ms Li.

Singapore is transforming into a world-class digital economy and as it rolls out more technology initiatives, the "labour pool is poised to be one of the most tech-savvy workforces in the world," said Ms Sun.

"We will be a highly favoured destination among tech firms that are looking to expand their digital footprint in the region. We may expect an increasing number of tech giants to grow their businesses here. Expats with the state-ofthe-art technological know-how may be deployed to Singapore," said Ms Sun.

Leasing demand was robust amid a tightening of new inventory supply and depleting stock.

Last year, the number of completed homes fell for a third consecutive year to 7,527 units, about a third of what was completed in 2016.

This number is projected to fall further to 6,294 units this year. It is substantially below the 10-year annual average completion of 13,915 units.

Furthermore, many homes were demolished to make way for newer developments after the last collective sales cycle.

"As a result, the lower inventory has probably helped to prop up rental prices last year," said Ms Sun. She expects rental growth of 1-3 per cent in 2020.

Will the Covid-19 outbreak crimp employment growth and lead to an exodus of expats from Singapore?

This month, the government warned of a possible recession in 2020 and the official growth forecast was downgraded on Feb 17 to between -0.5 per cent and 1.5 per cent from 0.5-2.5 per cent previously.

Ms Li said the lower completion rate of new homes in 2020 will give landlords the comfort of increasing rents even during challenging times.

"However, should the virus outbreak problem persist and Singapore economic condition deteriorates further, the rental uptick in 2019 could just be a flash in the pan," said Ms Li.