As property prices continue to slide, more home sellers are choosing to rent out their units first in the hope of fetching a better selling price once the residential market recovers, media reports said.
Private home prices have been decreasing since Q3 2013, as loan curbs weigh on demand and cooling measures bite. The resale market has also witnessed a drop in transactions.
Data from the Urban Redevelopment Authority (URA) showed that the number of private homes sold in the secondary market fell to 4,860 units last year from 6,671 in 2013.
The drop in resale volume indicates that potential sellers are holding back and renting out their units instead, said property watchers.
“Many sellers have the intention to sell but they couldn’t get the prices they want, so they decided to rent out first so they could buy time and sell the property when the market recovers,” noted OrangeTee managing director Steven Tan.
This has resulted in more activity within the rental market. URA revealed that the number of rental transactions increased from 50,417 cases in 2013 to 56,417 in 2014.
Going forward, analysts expect more potential home sellers to turn to the rental market for respite as prices continue to drop. However, rising interest rates may force some owners to sell.
“There is a minority who are probably over-leveraged – they have taken too many loans. So especially those who have problems renting out units, they can’t fill the space; on the contrary, interest rates are increasing which means their instalments are increasing – they are under pressure,” said Eugene Lim, key executive officer at ERA Realty.
“So probably as the year goes on, we may see more of these sellers unloading their units in the market to cut losses. But these form the minority; currently, in general, the market is not under any tremendous pressure,” he added.