Rents to drop in Q1 before recovering on economic growth

In the first part of 2023, the rent for residential non-landed properties went up well despite completion of approximately 7,000 units.

The first quarter saw a 6.2% increase in rents, though signs of a deceleration were evident in the subsequent quarter. Landlords are taking longer to locate a tenant. Combining the lack of activity in the job market with the decline in private rents, for three consecutive quarters the increase in rents fell to 2,3% in the 2nd quarter of 2023.

Affinity Serangoon (1052 units), Avenue South Residences(1 074 units), Kent Ridge Hill Residences(548 units), Riverfront Residences(1,472 Units), Riviere (455 Units) and The Woodleigh Residences667 are some of larger non-landed housing projects to be completed in H1-2023.

The second half of the year 2023 will see a change in market conditions. The sharp rise in the number of private non-landed houses completed in H2 was accompanied by a slowing in employment. Rents in third quarter were flattened and grew by 0.2 percent. Rents decreased by 1.8% during the fourth quarter of 2018 for the 1st time since Q4 2019.

Amber Park (592 unites), Dairy Farm Residences (378 unites), Kopar Newton (378 unites), Leedon Green (640 units), Midwood (464 units), Normanton Park (1870 units), Parc Clementis (1248 units), Sengkang Great Residences (680 unitites), The Florence Residences 1,410 unitites, The M 522 unitsites and Treasure at Tampines 2203 unitsites were amongst larger non landed residential projects finished in H2 2023.

Rents decreased for two consecutive quarters between Q3 and 2023 Q4 in the Core Central Region. Rents have increased steeply since the year 2021. This has displaced many tenants who were priced out to the Rest of Central Region.

Rents in private non landed homes increased 6.9% for the year 2023. This was a much smaller increase than the 30% that occurred in 2022.

Seven districts have seen median gross rentals decline for the past two quarters. The three districts with the largest decreases are District 21: Upper Bukit Timah (Clementi Park, Ulu Pandan), district 4 (Telok Blangah Harbourfront), and district 26 (Upper Thomson Springleaf).

District 4 median monthly gross rents decreased by 5.7 percent in Q3 compared to Q4, and by 1.1percent in Q4. The average is now S$5.28psf. Sentosa saw an increase in the rental of non-landed houses, however, these homes are larger and have lower median gross monthly rents.

In District 21, median rents per square foot per month dropped by 8.1% in Q4 and 2.9% in Q3. This was most likely due an increase in the supply of non landed private houses, and the displacement tenants to other district.

Gross median rents in district 26 have also decreased, by S$3.48/sf/month in both Q3 and Q4. The District 26 area tends to have older properties, which could have impacted rents.

Rents have increased in two areas. Rents of non-landed homes in the District 25 area (Kranji or Woodgrove) increased by 16.5 percent to S$4.61 each month.

Recent developments have seen the introduction of new categories of serviced apartments that can be rented for long periods to help meet demand. The standard leases of private property owner are unlikely to directly compete with such accommodation. Operators of serviced flats offer utilities, housekeeping and maintenance as part their package.

Prices rose less than rents, by only 32.3%. Estimated gross rental yields on non-landed houses in private ownership have improved throughout the island as rental growth exceeded capital values.

Rents in two areas rose significantly in H2. In H2 of 2023, rents in Districts 25 (Kranji) and 22 (Jurong), the median rents on private non-landed properties rose 16.5 percent to S$4.61 monthly, whereas Districts 22 (Kranji) saw 10.1 per cent increase to S$4.92 monthly.

These locations saw rents rise due to lack of supply. Woodgrove’s proximity to Singapore American School also contributed to this.

Rents may be weak in H1 of 2024 due to the market’s ability to absorb the surplus private non landed homes. In 2024 the private non-landed housing supply is expected to be reduced by half, from 19390 homes in 2023. Between 2024 and 2028, it is estimated that the average annual production will be 6,789 housing units. This is lower than the average annual production of 8,119 housing units over the last five years.

Rents on private residential non landed rentals are expected to rise in the following years as a result of the reduced supply.

Read more on : Kassia Condo

Renter demand could pick up in 2024 as a result of a stronger economic growth. So, the rental market is expected to bottom out by H2 2024 and then recover.

The district 25 (Kranji/Woodgrove) in Singapore may continue to be a good investment in the future, given that there hasn’t been a new supply in the area of private non landed homes since 2015.

To ease the supply squeeze, the government announced a temporary relaxation to the occupancy cap of larger dwelling units from Jan 22,2024 until Dec 31,2026.

In addition to higher property tax bills, the landlords have to take into account wear and damage due to more occupants.

Tenants will need to think about the inconveniences that come with sharing bathroom, living and eating areas with multiple people. It is thus likely that any impact will be minimal.






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