July 10, 2008

Prime rents poised to ease further

JLL sees more falls over next half year but rest of market should stay stable

By Joyce Teo, Property Correspondent

DECLINE: The drop in prime rentals in projects such as Tanglin Park is due to new units on the market and a slowing economy. -- BT FILE PHOTO

THE surging rents in prime areas that have had expatriates screaming for the best part of a year look to be easing, with some condos already registering falls of up to 12 per cent.

The declines are expected to intensify over the next three to six months, reversing a trend that saw some rents double or treble during the property peak last year.

Consultant Jones Lang LaSalle (JLL) said increased supply from newly built condominiums and a weakening economy are behind the projected prime rent slide, although rents in other parts of Singapore should stay largely stable.

Expats have also been voting with their feet and abandoning pricey prime areas and moving to fringe locations - and nudging rents there up a little in the process, said Dr Chua Yang Liang, the firm's head of research (South-East Asia).

Rents in the East Coast area, for example, rose 1.4 per cent in the first quarter but are now tipped to grow at a slower pace or even stay unchanged.

This is in contrast to prime areas, where landlords are feeling the chill of the new economic headwinds.

For instance, at Cuscaden Residences in the Tanglin area, rentals have fallen 12 per cent, from $6.20 per sq ft (psf) a month in the fourth quarter of last year to $5.46 psf in the first quarter of this year, said JLL.

A 1,485 sq ft unit will now fetch about $8,100, down from $9,200 at the end of last year.

Over at Tanglin Park, rentals have fallen 3.1 per cent from $5.21 psf to $5.05 psf.

Islandwide, supply started creeping up from the third quarter of last year, said Dr Chua.

But not all owners are yet willing to lower their expectations, said market watchers.

'The rental market is a lot slower than last year,' said Ms Kavita Borglin, an agent with Premiere Realty, who said rents in prime areas will be hit by new supply, particularly smaller units.

'The availability of one- to three-bedroom apartments has increased so rents have softened,' she said.

At Robertson 100 in Robertson Quay, at least 10 two-bedroom flats are on the market but the owners were all reluctant to lower their asking rents of $5,000 to $6,000, she said.

Ms Borglin's client, an expat with a rental budget of $4,500, eventually settled for a Newton area apartment.

She added that owners with large apartments of four bedrooms or more could still keep the same rents, as such large flats are still hard to come by.

JLL said Singapore's rating as the 13th most expensive Asian city for expats, coupled with a slower hiring pace in the coming months, may lead to fewer leasing deals over the remainder of the year.

A lacklustre collective sale market and weakening housing prices will continue to hit sentiment in the non-landed rental home market, said Dr Chua.

Meanwhile, JLL said in a statement yesterday that it has put Goldhill Centre near Novena MRT station up for sale. The indicative price for the freehold commercial site is $315 million.

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