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Published August 7, 2006

High-end homes lead rent rebound
Good demand from expats, but rents still have some way to go before reaching highs of 2000


(SINGAPORE) Residential rents in Singapore have rebounded by double-digit figures since the market bottomed out two years ago, but they still have some way to go before reaching the high levels achieved in 2000.

The present market recovery in residential leasing is led by the luxury segment, data shows. Rents for high-end properties have rebounded faster than rents for the rest of the market - and market players attribute this to good demand from the expatriate crowd.

Data from property consultancy CB Richard Ellis (CBRE), which monitors a sample of properties in each segment to calculate average residential rents, shows that while average rents for luxury properties have climbed 17.1 per cent since the second quarter of 2004 - when the residential leasing market hit rock-bottom - rents across the whole island have increased by a smaller 13.9 per cent. And rents in what CBRE terms the 'prime' category, which is slightly more low-end than the luxury category, have also increased by a comparatively lower 13 per cent.

Average rents for the luxury segment grew from $3.50 per sq ft per month (psm) in the second quarter of 2004 to $4.10 psm in the second quarter of 2006. Rents for the prime segment grew from $2.30 psm to $2.60 psm, while islandwide rents climbed from $1.58 psm to $1.80 psm.

Observers say that the rental uptrend is in line with the general recovery and strengthening of the economy. But they also agree that upward price movements - especially in the high-end segment - are aided by expatriate demand. 'The continued rental uptrend . . . is an indication that there is strong expatriate demand for quality rental housing, as well as some signs of improvement in the budget for housing,' CBRE's associate director for residential services Teresa Tso said.

Wallace Chu, senior manager of Savills Singapore, agrees with the assessment. 'One reason for this is that a lot of expats are coming in,' he said.

According to Savills, more senior executives are relocating to Singapore with higher housing allowances of $15,000 per month and above, and these executives usually look for larger units and detached houses in prime districts.

But recent figures released by the Urban Redevelopment Authority (URA) show that rents are still below their recent highs in the third quarter of 2000 for all types of private properties - non-landed apartments, terrace and semi-detached houses, and bungalows.

Present market sentiment believes that there is still a bit of time to go before prices draw on par with their highs in 2000, and one reason for this is that multinational companies have not been too quick to increase their housing allowances for the people they have brought into Singapore since the property downturn began. 'While companies have adjusted expatriate housing budgets upwards since late 2005 in response to the upward market movement, many are keen to look into localised packages for their expatriates with a view to managing fixed costs whenever possible,' said CBRE's Ms Tso.

In a departure from URA's statistics, CBRE's data shows that islandwide rents have recovered to even exceed their 2000 high, while rents in the prime and luxury segments have almost reached the 2000 levels. CBRE said, however, that its sample size is much smaller than that used by the URA, and that calculation methods also differ.

Another effect of the expatriate demand is that properties in the two parts of Singapore more popular with the expat crowd - the Central and East regions - are seeing good rent growth. Looking at apartment and condominium rents across Singapore, Ms Tso said: 'While these rents have on the whole improved islandwide, some regions have nevertheless moved ahead of the pack.'

As for rents outside the high-end segment, market watchers think that it will not be too long before a supply crunch means that increasing rents in top-tier properties filter down to the rest of the market. For example, demand for landed properties is expected to go up at a time when the number of such properties remain in short supply. This means that house-hunters may start to look at smaller properties, pushing up prices.