Homes in districts 9, 10 and 11 are seeing more rental enquiries now that prime rents have fallen
BUFFETED by so much negative economic data, the residential rental market inevitably succumbed, with rents falling sharply by 8.5 per cent in the first quarter, and another 5.3 per cent in Q2. While the decline may be showing the first signs of easing, the leasing market remains depressed given the lingering concerns about the large number of new homes coming on stream.
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Housing supply is perhaps the biggest influence on rentals. New home completions this year are expected to exceed 11,000 units, going by data from the Urban Redevelopment Authority (URA). On the other hand, the average long-term take-up stands at about 7,200 units a year. While this demand-supply imbalance will weigh on rents, the relatively smaller number of completed units expected next year (just over 5,000 units) may provide some reprieve, allowing the market to digest the excesses and rents to stabilise.
Also, the estimated number of completed units in 2011 and 2012 may be lower than stated given that some projects have yet to begin construction. Nevertheless, the supply pipeline is strong enough to keep the rental market in check, with any significant rise in asking rents by landlords likely to be faced with tenant resistance.
However, leasing demand in the past few quarters continued to be robust, underpinned by falling rentals. Leasing volume in July hit a record high of 4,252, about 11 per cent more than the previous record of 3,846 set in August last year.
This comes after a strong Q2 of more than 10,300 leasing transactions, just below the all-time high of 10,900 done in Q3 2008. What is even more encouraging is that the islandwide vacancy rate remained unchanged at 5.9 per cent as of Q2 2009, despite the large number of units completed so far this year (over 6,000 units). This is a testament to the depth of housing demand. Continue reading
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