THE private residential leasing market has grown steadily weaker from the previous year in most districts of Singapore, with unpopular suburban locations the hardest hit.
And no reprieve is in sight as latest Q3 figures show non-landed private home rentals sliding another 1.1 per cent from Q2, led by the core central region.
From Q2 last year – when loan restrictions had not come into force – to Q2 this year, rents fell across all but seven of the 28 districts, with District 20 (Bishan, Ang Mo Kio) bucking the trend in a big way.
Condos and apartments in District 27 (Yishun and Sembawang) suffered the steepest rent decline of 10.6 per cent. Rents stayed flat in prime District 11 (Watten Estate, Novena, Thomson), as well as District 7 (Middle Road, Golden Mile) and District 12 (Balestier, Toa Payoh, Serangoon). Three others saw single-digit increases. Only District 20 (Bishan, Ang Mo Kio) deviated with a whopping 15.9 per cent jump in rental prices.
SLP International executive director Nicholas Mak noted that the number of rental transactions also shot up in Bishan and Ang Mo Kio by 138 per cent from 88 in Q2 last year, to 209 in Q2 this year.
DTZ South-east Asia regional head of research Lee Lay Keng said: “All things being equal, projects in mature housing estates could command higher rents, given their accessibility to public transport and other amenities, compared to newer and still-developing housing estates.
“This could explain why rents in the mature housing estates of Bishan and Ang Mo Kio saw double-digit growth, compared to rents in other housing estates such as Yishun and Sembawang.”
But other reasons could also affect the numbers, such as the rejuvenation of Bishan Park, or the completion of the superbly located Centro Residences in Q1.
The many small and therefore investor-friendly units at Centro Residences with higher psf prices may also have skewed the estate’s median rents. The condo recorded 107 lease transactions in Q1 and Q2 alone.
But new rental stock can cut both ways. When there is a supply glut with too many projects being completed around the same time, it could intensify competition for tenants.
This was the case in Yishun and Sembawang, where more than 1,000 units were completed between 2013 and H1 2014, explained Ms Lee. In contrast, no other major residential project was completed in District 20 between Q2 2013 and Q2 2014 besides the 329-unit Centro Residences.
For the next six to 12 months, the slowing inflow of foreigners into Singapore and consequent shrinking tenant pool, contrasted against a growing supply of completed condo units, is expected to continue to depress rents, especially in the suburbs.
“Between H2 and 2015 alone, close to 30,000 units are expected to be completed, substantially greater than the past two years’ supply of 23,000 units. Of this, about 56 per cent will be in the suburban areas, and is thus likely to exert a further strain on rents as potential tenants will have greater bargaining power,” said Ms Lee.
“The imminent supply glut could lead to a flight to quality, as some tenants will be able to move closer to the CBD for the same rental budget. The result is that the OCR (outside central region) residential landlords may get the short end of the stick,” added Mr Mak.
The reverse was true before the global financial crisis – demand for rental homes was high amid a tight supply.
This was when corporations still defrayed much of expats’ housing and other allowances. Part of their generosity had to do with wanting to incentivise their employees to relocate to Asia.
But such incentives became less relevant after the crisis, as “economic refugees” fled their recession-ravaged countries to Asian financial centres such as Singapore and Hong Kong that have weathered the crisis better.
As banks and corporations kept a tighter rein on purse strings post-crisis, they also began to realise that expat packages were no longer required to draw foreigners here. So these packages slowly went away, save for a small minority in C-suite roles, said Wesley Hui, director at headhunter firm WiseNet Asia.
Now, most expats are employed on local terms and simply given a lump-sum allowance to take care of their housing, transport, and children’s education, he added.
Meanwhile, Singapore’s continued tightening of foreign hiring is expected to further cut the number of tenants looking for a temporary home here.