Is cheaper rent on the cards soon in Singapore?
Are the rents slowing after an increase in quarterly rates?
According to URA rental statistics The median monthly rent for all condominiums (excluding ECs) was $5.16 per square foot (psf) that is a sluggish rate in comparison to a month ago. Median rents for comparable units increased by 14.2 percent in the same period in the year before.
In the Covid-19 epidemic that was in the news, there was a large number of locals renting apartments due to delays in construction in the construction of new housing units as well as work-from-home demands. Tenants who were waiting for their HDB or private home to be built are now moving into their new home.
A combination of factors like less demand from home buyers and an increase in the supply of housing are causing some challenges in the rental market. This contrasts to a year ago, when a surge in demand drove the cost of renting by more than 30%, which is the fastest rate of growth in 2007.
The private rental market is finally seeing some moderation. Rent prices have stabilized following two years of steady increase. Growth rates have stagnated for more than six months.
Prime segment or core central area (CCR) was the one that was most affected. Demand dropped by 11.5 percent year-on-year during the first eight months of 2023. This was followed by the suburbs, or outside of the central region, that saw a decline of 10.5%, and the city edges or the rest of the central region in which it fell by 5.8 percent.
Tenant the competition for housing units started to slow down with the increase of condominiums being completed in the second quarter of 2023. Since then the mood has changed with a drop in inquiries and viewings of homes by prospective tenants.
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At the start of the year 2023, many tenants were struggling with the rising rents, as landlords passed on the additional costs incurred by higher-priced mortgages and more expensive living expenses. Renters are at an impasse after seeing the astronomical rise in rent prices.
The median price for luxury condos is expected to hit its highest in April 2023, at $6.11 per square foot (psf) per month. This is because the median rents decreased during the subsequent four months. The rents of RCR and OCR may not have risen to their highest levels. Rent prices may continue their upward trend as more condominiums are built and their owners ask for higher rents.
The leasing market has experienced an abrupt reversal due to the consequence of a slowing economy, the increase in inventory, and the resistance to price increases. According to data provided by the Urban Redevelopment Authority, 56,098 residential rental contracts (excluding executive condos, also known as ECs) were signed in the first eight months of 2023. This is considerably lower than the 61,801 contracts that were signed in 2021 as well as the 66,603 contracts signed in 2022.
As more families in the area give up their rental units and move out, the rate of vacant completed residential properties in private homes climbed upwards from 6 percent in the first quarter, to 6.3 percent in the second quarter of 2023.
Some tenants chose to move out of Singapore, and others decided to rent lower-cost housing in the housing market that is public.
In certain submarkets the rental market is already beginning exhibit signs of improvement.
The rent-price disparity between tenants and landlords remains large, resulting in less deals. Rent prices surpassed records and hit new heights during the 2023 second quarter. A shortage of housing permits enabled landlords to request higher rents since the risk of losing tenants was minimal.
The median prices for luxury condominiums in CCR dropped 2.9 percent to $5.71 psf per month, and median rents for city-fringe condos in RCR decreased by 1.3 percent to $5.36 psf per month from February to August 2023. In contrast, median rents of suburban condominiums in OCR were up 2.3 percent up to $4.54 per square foot per month.
If the market is tilted favoring tenants and rent prices moderate further, the market may increase next year in the event that more tenants renew or sign new leases offering cheaper rents. Tenants might prefer leases with shorter terms since they anticipate a rent price reductions, which could lead to more transactions.
The number of housing units in public has also risen in the last few years, as more have reached their minimum occupancy limit. The existing stock will continue to increase as renters from the local market slowly exit the market. This will ease the fierce competition for homes between tenants.
More than 8,000 private residential houses which include ECs, were completed during the first quarter of this year. The supply of homes was more than tripled when compared to periods in 2022 (3,501 units) and 2021 (3,550 units).
The rental market is under pressure due to the increase in supply. There are more options for homes with a steady flow of new homes being added to the market in private.
Rents could be reduced due to more landlords selling their properties at a higher price. Should the global economy perform better than expected it is possible for expatriates to return to Singapore, supporting the rental market.
Owing to the mismatch between landlords’ and tenants’ expectations and as the market goes through an adjustment period the rental market could continue to decline. This may be a result of the seasonal year-end slowdown in the fourth quarter of this year.
The revelation of a shrinking pool of tenants and intensifying competition hasn’t affected the average homeowner. Despite a slower market and an increasing supply of housing landlords have held the price of their properties at a record high. A lot of landlords are hesitant to cut their asking price due to rising costs and mortgages.
Certain firms are less confident about their hiring expectations for 2024. A slowing economy as well as an unfavourable global outlook could affect the cost of renting.
The long-term and mid-term rent-price growth will largely depend on the performance of the wider economy. The news that has been negative about the Chinese economy, and the more hawkish attitude of the US Federal Reserve have already had a negative impact on business confidence.
Landlords may find positives. The cost of having several properties has risen due to cooling measures that resulted in higher HDB upgraders to rent prior to buying the private residence.