Average rents in Singapore fell in the first quarter of 2015 despite an increase in leasing activity, revealed CBRE and reported in the media.
In its report, CBRE said lease commencements rose 3.1 percent quarter-on-quarter to 15,229 in Q1 2015. On an annual basis, it was 13.5 percent higher than during the same period last year.
The rise was attributed to a flight to quality as tenants from older developments or HDB flats seized the opportunity to move into newly constructed condominiums at lower rents.
New permanent residents (PRs) could have also contributed to the increase as they rented homes while waiting to fulfill the mandatory three years prior to acquiring resale HDB flats.
However, the increase in rental volume failed to push up rents as it fell across all regions.
The rental index for the Core Central Region (CCR) registered the steepest decline of 1.9 percent quarter-on-quarter, followed by the Outside Central Region (OCR) which saw a drop of 1.8 percent. The Rest of Central Region (RCR) recorded the smallest drop of 1.6 percent.
Joseph Tan, executive director of residential at CBRE, explained that the sharper decline within the CCR and OCR was primarily due to an increased supply of rental properties.
He noted that the CCR, “which traditionally has the highest supply of rental stock, was hit by the shrinking budget of expatriates and the availability of newer accommodation at more attractive rents.”
Meanwhile, an unprecedented number of new condos were built in the OCR.
In Q1 2015, 2,976 new private homes were built which includes those within the OCR like Woodhaven with 337 units and Hedges Park with 501 units.
Tan revealed that most of these apartments were bought for investment and not for occupation by owners.
“Under the present lull market, these owners were more prepared to secure tenants at lower rents rather than leave them vacant,” he said.
As a result, the occupancy rate rose to 92.8 percent, while the number of vacant units fell 7.2 percent.
CBRE said average rent for luxury properties dipped two percent year-on-year to $4.95 psf per month. Prime properties saw rents decline 4.2 percent year-on-year to $4.55 psf per month, while rents for other properties fell six percent to $3.15 psf per month.
Looking ahead, the real estate firm expects leasing volume for the entire year to fall by five to 10 percent from last year, while overall rents are expected to drop by five to seven percent, given the mounting pressure from the growing supply of properties.
CBRE expects the number of new homes completed to reach 22,000 units by end-2015, or up 10.4 percent from 19,921 last year.