Rental volume grows as buyers wait for further price drops

More homeowners are deciding to sell their property before prices fall further and wait for heftier price drops before committing to buy — a trend that has resulted in higher rental volumes, said media reports.

According to statistics from HSR Research and the Urban Redevelopment Authority (URA), nearly 38,000 leasing agreements were inked for non-landed private houses between January and August 2014.

In comparison, only 34,000 and 35,000 and rental contracts were signed respectively during the same period in 2012 and 2013.

Additionally, this arrangement is logical, said experts. Apart from allowing house hunters to maximise the sales profits from their homes, it also enables them to take advantage of sliding rents due to a higher supply of completed houses.

Based on URA data, private home prices declined by one percent in Q2 2014 — its third consecutive quarter of sliding price, following the 1.3 percent and 0.9 percent dip in the previous quarters.

“We have noticed that many people are choosing to rent first and hoping that prices will come down later on. They sell off their properties and rent before getting their next home. We are also seeing people signing shorter leases because they are hoping for rents to come down,” noted Chris Koh, Director of Chris International.

However, the better leasing activity has not led to higher rents.

In the contrary, rents for private non-landed homes have dropped since Q4 2013. Over the same period, URA’s rental index slipped by 1.1 percent, while median prices decreased to $3.79 psf per month in Q2 2014.

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