Tag Archives: HDB Flats

Rents squeezed by new demand-supply scenarios

RENTALS for private condos/apartments as well as HDB flats continued to come under presure in October, latest SRX flash estimates show.

Market watchers blame this on the tightened inflow of foreign talent crimping leasing demand on the one hand and a ramp-up in private home completions. Moreover, HDB upgraders are choosing to put their flats up for rent after they have moved into their new private condos given current weak buying demand for HDB resale flats due to the 30 per cent mortgage service ratio cap.

This scenario is expected to continue in the near future, with more than 20,000 private homes forecast to be completed for each of the next two years – mostly in the suburbs, note industry players. The nearly 18,000 private homes estimated for completion this year reflect a substantial increase from 13,150 units last year and 10,329 units in 2012.

Flash estimates for October 2014 released on Wednesday show that since December last year, SRX’s overall rental index for non-landed private homes has eased 3.9 per cent, a bigger drop compared with the 2.5 per cent fall for the whole of last year.

In the suburbs or Outside Central Region (OCR), the rent drop so far this year has been 5.5 per cent, more than double the 2.5 per cent decline last year.

ERA Realty’s key executive officer Eugene Lim noted that almost 60 per cent of the 18,000 private homes expected to be completed this year are in surburban areas.

Agreeing, R’ST Research director Ong Kah Seng added: “Expats, especially those from Western countries, have not massively decentralised to rent suburban condos. A typical mass-market project has at least 300 units and is crowded on weekends. These expats prefer city-fringe or smallish developments that offer a quieter environment; so tenant demand for suburban condos tends to be mainly from Asian professionals who are cost savvy and open to even renting rooms in a HDB flat.”

Going by SRX’s flash estimates, the rent deterioration has been even more pronounced in Core Central Region (CCR), the so-called high end segment; so far this year, the subindex for the region has shrunk 4.8 per cent – contrasting with an increase of 1.3 per cent in 2013.

In the city fringe, or Rest of Central Region (RCR), SRX’s October 2014 flash estimate was 2.8 per cent lower than December 2013. Last year the subindex slipped 3.8 per cent.

For HDB rents, SRX’s flash estimate for October was 1.7 per cent below last December. Full year 2013, the index declined 2 per cent.

R’ST Research’s Mr Ong estimates that HDB rents will contract by up to 4 per cent for the whole of this year and weaken further by as much as 8 per cent in 2015. “Rents of HDB flats will better match tenants’ affordability by the end of 2015,” he argued.

For private condo and apartment rents, Mr Ong estimates a full-year 2014 drop of around 7 per cent, to be followed by a further decline of up to 10 per cent next year. “The fall will be most pronounced in Core Central Region as companies are cutting back on housing allowances. For Outside Central Region, the drop will be due to increased completions of sububurban condos,” he said.

Nicholas Mak, executive director at SLP International, argues that the OCR may face the greatest downward pressure on rents given that this is the segment with the biggest private home completions over the next few years. On the whole, notes Mr Mak, “Without a substantial increase in the population of foreigners boosting leasing demand in both the private and HDB housing markets, rents (in the two segments) are likely to continue to slip gradually in 2015”.

ERA’s Mr Lim said that competition for tenants among suburban private property owners who are lowering their rents for family-sized units to S$2,500-3,500 a month are drawing tenants away from the HDB rental market.

While he expects this trend to continue given that the bulk of newly completed private homes are in suburban locations, Mr Lim reckons that the “HDB rental market will continue to have firm support from tenants with monthly rental budgets of S$2,500 or lower”.

For October itself, the SRX overall non-landed private home rental index dipped 0.9 per cent compared to September, marking the ninth consecutive monthly fall. The October flash estimate reflects a year-on-year contraction of 5.3 per cent.

Month-on-month, the subindices for CCR, RCR and OCR slipped 0.7 per cent, 1.1 per cent and 1.5 per cent respectively.

Leasing deals were entered into for an estimated 3,208 non-landed private homes last month, a slight dip from 3,250 units in September. Year-on-year, the rental volume in October 2014 was up 11.8 per cent.

SRX’s rental index for HDB flats shed 0.5 per cent month-on-month in October. Year-on-year, the drop was 2.1 per cent.

Rentals of four-room, five-room and executive flats registered respective month-on-month decreases of 0.8 per cent, 0.2 per cent and 1.4 per cent. On the other hand, three-room flat rentals inched up 0.2 per cent.

SRX estimates rental contracts were inked for 1,559 HDB flats last month, up 0.8 per cent from 1,546 units in September. Year-on-year rental volume in October 2014 was down 2 per cent.

Market largely unaffected by subletting caps

Six months after the start of quotas on subletting public flats to foreigners, the fear that they would hurt the rental market does not seem to have come true.

As of June, only about 1 per cent of Housing Board neighbourhoods and blocks have reached the quota limits, the HDB told The Straits Times.

This is about the same proportion initially affected when the quota kicked in this January.

Since then, only 8 per cent of the flats in a neighbourhood or 11 per cent of the flats in a block can be wholly sublet to permanent residents or foreigners. This does not apply to subletting of rooms.

HDB said the measure “is to prevent the formation of foreigner enclaves in HDB estates, and maintain the Singaporean character of our HDB heartland”.

Malaysians, however, are exempt from this restriction because of their cultural similarities.

Agents said the overall rental market has been cool, but is largely unaffected by the change.

More than 46,000 HDB flats have approval to be rented out wholly.

HDB rental prices fell from August, edging up in February and March but sliding thereafter. The median monthly rent for HDB flats was $2,300 last month.

“(The change) hasn’t really affected things much,” said Prop-Nex agent Calvin Ng, who has rented out several flats in the west since then. “So far, the cases I’ve handled are still within the quota.”

Dennis Wee Realty agent Aaron Lin said the bigger challenges in the rental market are the stricter foreign labour policy and excess supply of flats for rent.

He has come up against the quota only near MRT stations in the west, such as Clementi.

Property agents who focus on such plum areas – near MRT stations in the western part of Singapore – such as Dennis Wee Realty agent Jimmy Chua, have been hit. “Most of the blocks that are more popular near the MRT are affected,” he said.

He added that many flat-hunters are foreign students or fresh graduates from the nearby universities, some of whom had to settle for “second-choice” units.

Century21 chief executive officer Ku Swee Yong expects the quotas to bite in Jurong East, where two hospitals – with more than 4,000 health-care workers – will be completed in the next 12 months.

SLP Realty agent Jordan Lim, who specialises in renting, has shifted his focus away from Clementi as a result of the change.

The quotas are not an issue in areas such as the east, he said.

But landlords such as Mr James Tan, who is in his 40s, do not have that option. Since February, his flat in West Coast Road has been subject to the quota and can be sublet only to Singaporeans or Malaysians. But no such prospective tenants have contacted him.

“I’m totally unable to rent out my flat. I just have to wait and check every month,” he said.

The quota information, available on the HDB’s website, is updated on the first of every month and is valid for the whole month.

Source : ST Property