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Published February 27, 2007

HDB rental jumps on spillover demand

Trend appears to be island-wide and for all apartment sizes, but resale prices stay flat


(SINGAPORE) Rents for HDB flats have surged in the past 12 months, driven by spillover demand as rents for private housing have climbed.

Figures compiled by property agency ERA for BT show that public housing resale prices have stayed flat.

But on the rental side it's a different story. Increases range from 8.3 per cent for an executive flat at Jurong East to as much as 44.4 per cent for a four-room flat at Tampines.

The trend seems to be island-wide - and for all apartment sizes. Rent for a three-room flat at Toa Payoh, for instance, has climbed 33 per cent to $1,200 a month, from $900 a year earlier. Similarly, the rent for an executive flat at Pasir Ris is now $1,300, versus $1,000 in Q1 last year.

ERA is not the only agency to report the trend. Dennis Wee Properties says HDB rents have climbed 10-15 per cent in the past year. And the rise has been greater for flats close to amenities or services, such as nearness to an MRT station or town centre.

The rise is not limited to towns closer to the central district, such as Toa Payoh and Ang Mo Kio. Rents in outlying areas such as Pasir Ris and Woodlands have also gone up.

Market watchers say this is because renters of HDB flats are less likely to care about distance to the Central Business District and Orchard Road. Instead they look for good transport connections - often placing a high value on a nearby MRT station.

Agents attribute the increase in HDB rents to a filtering-down of rent rises in the private market.

'Actually, this is a new trend,' said ERA assistant vice-president Eugene Lim. 'For a very long time the HDB rental market has been very stable. But now, with rents for private property increasing, those with a smaller budget might look at HDB flats instead, when in the past they might have rented condo apartments.'

Dennis Wee Properties director Chris Koh also said the climb in HDB rents is recent. They went up 5-10 per cent in the first six months of 2006 and the rate of increase picked up to 10-15 per cent in the second half of the year, he said. 'The gap has widened between HDB rents and private property rents, making HDB rents look more attractive by comparison. Because of the increased demand, prices are going up. It's basic demand and supply.'

According to Savills Singapore, rents for private homes have climbed 18.5 per cent in the past year. And rents for mass market homes alone - a segment that HDB flats could substitute for - have risen 19.5 per cent. The rise in HDB rents is despite more whole flats being available for sub-letting.

Data from HDB show that as of January this year, 12,700 flats were approved for whole sub-letting, versus 10,700 a year earlier.

The rent increase means demand has grown even more than supply, said ERA's Mr Lim. He attributes this mainly to an increase in the number of expatriates with lower housing allowances or employed on local terms.

'There is a new kind of expat today - with a lower budget,' he said. 'They often come here on local terms, which means rent is included in their basic salary. These expats are trying to maximise their salary.'

But expat HDB renters are not typical, Mr Lim said. 'They could be Malaysians coming here to work or even students who are here to study, looking for HDB flats near their campuses.'

Dennis Wee's Mr Koh cites a couple of examples - two IT professionals and three nurses from the Philippines getting together to rent flats.

But although HDB rents have risen, resale flat values are expected only to edge up this year. This is because the two markets are very different, notes Mr Lim. Rented HDB units cater mainly to foreigners, while HDB flat buyers are Singaporean.

The HDB resale price index released last month shows prices rose just 2 per cent in full-year 2006. And the number of resale flats transacted fell below 30,000 for the first time in a decade.