Residential property rents rise in October, but condo sales fall: SRX, 99.co

Nov 09, 2022

Condominium and Housing and Development Board (HDB) rental rates rose in October despite a major drop in condo rental volumes, according to SRX and 99.co flash estimates released Wednesday (Nov 9).

Rents in the condo market increased 2.7% from September to the 22nd consecutive month, led by a 3.2% month-on-month increase in the Rest of Central Region (RCR). Rentals in the Core Central Region (CCR) and Outside Central Region (OCR) increased by 2.1% and 2.6%, respectively, month on month.

Overall rental costs for condominiums increased by 32.7 percent year on year, with rents in the CCR, RCR, and OCR increasing by 31.1 percent, 34.2 percent, and 32.6 percent, respectively.

Condo rental numbers, on the other hand, declined 8.7 percent from September, with an expected 4,355 units rented in October compared to 4,771 units rented earlier. This is a 13.9% year-on-year volume decrease.

According to Pow Ying Khuan, head of research at 99 Group, one possible explanation for the reduced volumes is a shortage of supply in the market.

"Due to building delays caused by the pandemic, fewer new homes have been finished and are available for rent," he noted.

By area, the OCR accounted for 39% of October's volumes, while the RCR accounted for 35.33% and the CCR accounted for 25.77%.

Meanwhile, HDB rentals climbed by 1.8% in October over the previous month, with mature and non-mature estate rates increasing by 1.6% and 2.1%, respectively.

Although three-room HDB rates declined by 1% from the previous month, executive and four-room rents more than compensated, jumping by 6.1% and 4.4%, respectively. Rental prices for five-room apartments increased by 0.3%.

Overall, HDB rentals increased by 26.6 percent year on year, with rates in mature estates growing by 25.7 percent and rents in non-mature estates increasing by 27.4 percent, respectively. Three-room rentals increased by 22.5 percent year on year, four-roomers by 28.2 percent, five-roomers by 27.6 percent, and executive rents by 30.6 percent.

According to 99 Group's Pow, October's rental price growth for both the condominium and HDB markets is due to cooling measures that went into effect on September 30 - specifically, the recently mandated 15-month wait for private property owners (PPOs) who have sold their properties before they can buy a non-subsidised resale HDB flat.

"With the 15-month delay, it was thought that this would have a spillover effect on the rental market, since more PPOs would rent in the meanwhile," he noted, adding that the entire effect may "take a few of months" to see.

Volumes in the HDB rental market increased 10.3% from the previous month, with an anticipated 1,995 units rented in October versus 1,809 units in September. This was 6% greater than the five-year average volume for October, and marks a 7.5% year-on-year rise over the prior year.

Three-room apartments accounted for 35.1 percent of October's volume, while four and five-room units accounted for 37.4 percent and 21.7 percent, respectively. Executive flats accounted for 5.8 percent of the month's total.

Pow said the "large increase" in rentals for executive flats testifies to growing demand for additional space, noting that four-room HDB and executive flats have witnessed the highest increase in rent over the past year.

"As rents rise, tenants may prefer to live in HDBs rather than condos, resulting in higher rents and volume in the HDB rental market," he noted.

OrangeTee & Tie chief executive Steven Tan commented on the overall rise in rental prices for both condo and HDB sectors, saying landlords may have raised their pricing in response to predicted interest rate hikes and rising inflation.

"With a limited housing market, renters may have no choice but to accept the rent rise." Given the upcoming increases in GST (goods and services tax), property tax, and interest rates, we expect rental prices to rise further as landlords continue to pass on cost increases to tenants," Tan added.

This rapid increase, however, may begin to slow next year, as additional condos are scheduled to be completed by 2023, adding to the rental pool.

Tan, like 99 Group's Pow, expects rental demand to remain resilient, owing in part to the 15-month wait period for PPOs.

"Couples awaiting the completion of their homes would also be required to continue renting if they do not desire to stay with their relatives in the meanwhile," he added.

Huttons chief executive Mark Yip said the "landlord's market" is likely to persist throughout 2022, noting that leasing activity continues at a "brisk pace" in October, with many tenants coming up for viewings.

Yip predicts a 5% increase in rentals for the final two months of 2022. In contrast to OrangeTee & Tie's Tan, he predicts a continuation of the sharp run-up in rentals in 2023 as a result of cooling measures.