Tag Archives: Singapore Rental

Suburban condo rents under added pressure

Rents at new completions within the city fringe area appear to be holding up, while rents at suburban condos are increasingly feeling the pressure, reported The Straits Times.

This comes as tenants move into more affordable units in central locations, often going for newer condos as well, said experts. “Suburban projects, and projects which do not have large-scale facilities, may lose out in the chase for tenants. Older developments are also losing tenants to newer developments,” said ERA Realty key executive officer Eugene Lim.

D’Leedon in Farrer Road, which was completed in Q4 2014, posted a median rent of S$4,288 per month in Q2 (S$3.57 psf per month), according to recent property data. While Lim described the rents as “decent”, they were still lower compared to rents at the nearby five year-old estate of Waterfall Gardens, which registered a median rent of S$3.92 psf per month in Q2.

Ku Swee Yong, CEO of Century 21, said the relatively lower rents at the 1,715-unit D’Leedon reflected the stiff competition for tenants after the project was completed in Q4 2014, which was also the period in which the rental market was on the downtrend. “Waterfall Gardens…does not have smaller units of one-bedroom or studios, so there is a certain amount of prestige even though it is older,” he said.

Meanwhile, rents at suburban areas were generally lower. Median rents at Woodhaven in Woodlands, which was completed in Q1, stood at $2,100 per month ($2.98 psf) in Q2, while the those at the nearby Casablanca were lower at S$2.65 psf, though quantum rents were on a higher median at S$2,800 for bigger units.

Median rents lower than S$3 are considered low, said Lim, noting that the tight labour rules led to a “very practical” leasing market in which tenants opt for 12-month leases. Growing completions will also continue to affect rents. “The mid-range budget of S$3,000 to S$6,000 is the most active, and within that range, a tenant will try to get the best possible deal.”

As such, suburban rents face more pressure compared to those within the central or city fringe areas, although bigger central city units may also be feeling the pressure, as fewer tenants can afford a monthly rent of around S$10,000.

“There are definitely headwinds in the upcoming demand for rental units,” Ku said, “With commodities at an all-time low and headwinds in financial services as well, expat headcount is likely to be flat, if not dropping.”

Supply glut, tightening expat demand depressing rents

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.