Will the rental market continue to favour landlords?

April 28, 2023

Concerns over leasing affordability in the local rental market have been raging since the start of 2022. According to market watchers at that time, an impending increase in rental prices was forecast to be just around the corner. A year on, their predictions have largely come to pass, and the rental market seems to have swung in favour of landlords in recent quarters.

This has raised the ire of many tenants in Singapore — both locals and foreigners. Some of the more exasperated ones took to social media in the early months of this year to recount their experiences. They cite a near-doubling of rents in certain residential areas and difficulties in securing affordable apartments, especially in the Core Central Region (CCR).

The heating up of the rental market is covered in the latest Real As State video, part of a monthly video series produced by EdgeProp Singapore. According to Alan Cheong, executive director of research and consultancy at Savills Singapore, landlords and tenants can expect most of the rental increases this year to occur in the first six months, before generally moderating in the second half of the year.

Based on URA data, the non-landed private residential rental index went up by 30% y-o-y in 2022. While this headline-grabbing number has stoked the market in recent months, it pales in comparison to the jump in the rental index in 2007, says Cheong.

In 2007, the rental index surged approximately 40% y-o-y. “That situation arose when the stock of available rental properties at the time could not meet the demand from tenants and investors,” he says.

The event that rocked the market and caused rents to surge was the government’s award of the Marina Bay Sands site in May 2006. This spurred opportunistic investors to snap up most of the available rental properties in the central region, so as to capitalise on strong rental demand when the project was completed.

According to Cheong, this removed some rentable properties from the market and broad[1]ly raised rents at the time.

Demand-supply mismatch galvanising rents

Cheong says that the current rental market has been galvanised as a result of a relatively low stock of rentable properties, especially in the CCR and CBD where new residential project completions have been relatively low over the past year or so. The mismatch between available rental supply and incoming tenant demand is pushing up rental prices, he says.

“While the increase in interest rates is one of the many factors that motivate landlords to increase their asking rents, the greatest determinant of the high rents is the balance of demand and supply in the rental market,” he adds.

Cheong says that rental demand has been strong since the second half of 2022. On the supply side, the pipeline of new rental units entering the market was tight due to “pandemic-induced delays” in some construction projects.

As a result of higher rental prices, some tenants who used to lease apartments in the CCR have to look further afield in other regions for affordable properties. Based on feedback from the Savills residential leasing team, tenants have gone to as far as Jurong East in some cases.

More at: https://www.edgeprop.sg/property-new...vour-landlords