Condo, HDB leasing volumes fall as November rentals climb: SRX, 99.co

Dec 14, 2022

RESIDENTIAL leasing volumes fell in Singapore for the month of November against rising rentals for condominiums and Housing and Development Board (HDB) flats, which saw their 23rd and 29th straight months of rental increase, respectively.

According to flash estimates from SRX and 99.co on Wednesday (Dec 14), November condo rents rose 2 per cent from the previous month and 34 per cent year on year, driven mainly by contributions from the Outside Central Region (OCR), where rents grew 0.8 per cent from October 36.5 per cent from the year before.

Rents in the Rest of Central Region (RCR) grew 1.5 per cent on month and 33.9 per cent on year, while Core Central Region (CCR) rentals were up 0.8 per cent from the previous month and 30.6 per cent from November 2021.

Pow Ying Khuan, 99 Group’s head of research, said one factor for the higher November condominium rents could stem from the continuing spillover effect from Sep 30 cooling measures, which include a 15-month wait-out period for private homeowners looking to buy resale HDB flats after selling their properties.

“Soon after the announcement, HDB received 450 appeals from private homeowners on the 15-month waiting period and would exercise flexibility in waiving the wait-out period for some of them,” noted Pow.

“For those whose appeal failed, it is likely they would have to wait and consider renting thereafter.”

Comparatively slower price increases in RCR and CCR could indicate price resistance in these areas, he added, with the convenience of city-centre train stations on the Thomson-East Coast Line possibly drawing more renters to choose suburban homes.

An estimated 4,160 condo units were rented in November, down 4.5 per cent from some 4,355 units the previous month. This is 7.2 per cent lower than the five-year average volume for November, and represents a 16.5 per cent decline from the previous year’s volumes.

Breaking it down by region, 40.4 per cent of the total condo rental volumes are from the OCR, 32.9 per cent from the RCR and 26.7 per cent from the CCR.

Christine Sun, senior vice-president of research and analytics at OrangeTee & Tie, said the dip in leasing transactions for November may be due to more tenants and landlords going on holiday during the year-end period, resulting in fewer house viewings.

She also highlighted a diminishing pool of available condo rental stock, as the trend of tenants signing longer rental leases would progressively lead to fewer homes available for rent.

“Looking ahead, there will be more (private) homes completed next year. The new stock may help alleviate the supply crunch and slow rental hikes,” she said.

In the HDB rental market, prices increased 1.6 per cent from October 2022 and 27.8 per cent on a year-on-year basis.

Mature and non-mature estate rentals grew 1.9 per cent and 1.3 per cent respectively from the previous month, driven by price increases in three-room (3.2 per cent), five-room (2.1 per cent) and executive flat (1.2 per cent) rentals. Rents for four-roomers were up marginally on month by 0.1 per cent.

Year on year, overall HDB rentals grew by 27.8 per cent with mature and non-mature estates up 27.4 per cent and 28 per cent, respectively. All room types recorded year-on-year rent increases with three-room, four-room, five-room and executive rents rising a respective 26.3 per cent, 27.1 per cent, 29.6 per cent and 31.4 per cent.

99 Group’s Pow said the higher month-on-month demand for three-room HDB units in November could be due to a “sweet spot in rental pricing” compared to other room types. The surge in room prices in four- and five-room flat types could have also prompted tenants to downgrade their flat types to meet their rental budgets, he added.

“We note that particularly in popular towns such as Bishan and Bukit Merah, Central Area and Queenstown, the median rent for four-room, five-room and executive flats have breached the S$3,000 mark. On the other hand, the median rent for three-room flats have remained below S$3,000 across the board,” said Pow.

An estimated 1,691 HDB flats were rented out in November, down 15.2 per cent from about 1,995 units rented out the month before. This is also 10.9 per cent lower than the five-year average volume for the month of November, and represents a 10 per cent decline from November 2021 volumes.

Breaking it down by room type, 37.7 per cent of November 2022 HDB rental volumes are from three-room units, with 34.6 per cent from four-roomers, 22.7 per cent from five-roomers, and 5 per cent from executive flats.

The drop in HDB rental transactions could be due to more Malaysians not renewing their leases and going back to their daily commute across the Causeway, according to Huttons chief executive Mark Yip.

While Sun of OrangeTee & Tie noted that fewer HDB flats will be reaching the end of their Minimum Occupation Period in 2023, she said demand could still be healthy as HDB rents are “still lower and more affordable than private rentals”.

ERA Realty’s head of research Nicholas Mak however flagged a potential reduction in overall rental demand due to the high rates in recent months.

“As the rental rates continue to rise, the high rental rates could be the rental market’s worst enemy as it gradually reduces demand. Hence, rental rates could stabilise in late 2023 or early 2024 and could start to correct after that,” said Mak.

Although Huttons’ Yip noted that rental demand next year could be dampened by slower economic conditions, landlords could also pass some of the increase in property tax to their tenants. In his view, 2023 rentals will continue to rise – albeit at a “slower clip” of between 10 and 15 per cent.

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