Rents are set to decrease in Singapore very soon?
According to URA rent statistics, the median monthly rental for all condominiums (excluding ECs) was $5.16 per square foot (psf), a stagnant rate in comparison to six months ago. Comparatively median rents rose by 14.2 percent over the same period last year.
From February to August 2023, median rental rates of luxury condos fell 2.9 percent to $5.71 per square foot for a month. Meanwhile, median rents of city-fringe condominiums in RCR decreased by 1.3 percent to $5.36 per square foot per month. The median rent of suburban condominiums in OCR were up 2.3% to $4.54 per square foot for a month.
Luxury condominiums’ median rents likely peaked in April 2023 at $6.11 per sq ft. month. the median monthly rents fell for the next four months. Rents in RCR and OCR may not have reached their peaks. Prices for rent could continue to rise as condominiums are built and owners seek higher rents.
Renters may finally get some relief as rental prices have come under pressure from the ramp-up in the supply. With an ongoing stream of new houses entering the market, there are many options for homeowners.
More than 8,000 private residential homes, including ECs are being built during the first quarter of the year. The supply had nearly doubled with the same periods in 2022 (3.501 units) or 2021 (3.550 units).
The number of housing units in public has also risen, as a growing number have reached their minimum occupancy period. The existing stock will continue to increase as local renters gradually exit the market. The increased supply will lessen the fierce renters’ competition to secure homes.
The revelation of a shrinking pool tenants and a growing competition hasn’t affected the average homeowner. Despite a slowing economy and the looming shortage of housing many landlords clung on to sky-high asking prices. Most are reluctant to lower their asking prices because of rising costs and the higher cost of mortgages.
Owing to the mismatch between tenants’ and landlords expectations, and the market is undergoing a period of adjustment the rental market could remain in decline. The seasonal slowdown at the closing of the year might be a factor.
Trends in rent prices in the middleand long term will be heavily influenced by the overall economic performance. The business confidence level has suffered from negative news surrounding the Chinese economy, as well as the more extreme US Federal Reserve stance, which signalled another rate hike and more stringent the monetary policy.
Some companies are less optimistic regarding their plans to hire employees in 2024. Rent prices may be impacted by a slowing economy or a weaker outlook for the world.
If the market is tilted favoring tenants and rents decrease further, the market may pick up next year in the event that more tenants renew or sign new leases that offer cheaper rents. Tenants may prefer shorter leases since they anticipate a rent price adjustments, leading to more sales.
Landlords can find some positives. Cooling measures have pushed up the cost of having multiple properties which has led to more HDB upgraders to rent properties before buying a new house for their own.
The rising resales prices will cause more landlords to sell up and help reduce rental stock. If the global economy performs better than anticipated then we could see expatriates return to Singapore and support the rental market.
During the Covid-19 epidemic, a huge number of residents lived in apartments due to the delays in construction of new housing units. Tenants who had been waiting for their HDB or private unit to be finished are making their way to their new homes.
The rate of vacancy for completed residential units for private use has increased from 6 percent in the first quarter, to 6.3 percent by the end of the second quarter 2023.
The rent-price disparities between landlords and tenants remain vast, leading to fewer bargains. Rent prices broke records and hit fresh highs in the second quarter of 2023. Limited housing supply permitted landlords to ask for higher rents as the chance of losing tenants was very low.
Certain tenants decided to relocate from Singapore, and others opt to lease cheaper homes in the market for public housing.
The rental market is showing early signs of a adjustment in some sub-markets.
The market for private rentals is beginning to show signs of a slowdown. Rent prices have stabilized after two years of steady increases. The rate of growth has remained stagnant for over six months.
The combination of weaker demand at home and an increase in the supply of housing have created some issues in the rental market. This is stark contrast to a year ago, when a surge in demand drove rents by nearly 30%, which is the fastest annual growth since 2007.
A lot of tenants in 2023 were not able to pay the growing rents, as landlords were passing on higher costs due to mortgages that are more costly and higher expenses for living. Renters are at the breaking point following the astronomical rise in rent prices.
Tenant competition for housing units began to slow down with the increase of condominium completions during the second quarter of 2023. Since then the mood has changed with a drop in the number of inquiries and visits to houses by potential tenants.
Are the rents slowing after a string of quarterly increases?
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The leasing market has experienced a sharp reversal as a result of the economy’s slowing as well as the increased inventory and the opposition to price hikes. According to figures provided by the Urban Redevelopment Authority, 56,098 residential rental contracts (excluding executive condos, or ECs) were signed during the first eight months of 2023. This is considerably lower than the 61,801 contracts that were signed in 2021 and the 66,603 contracts signed in 2022.
The primary segment, or the central region (CCR) was the most hit, with demand slipping the most – by 11.5 per cent year-on-year for the initial eight months of 2023, followed by depreciation in suburbs or out of central region (OCR) in the region of 10.5 per cent and the city fringes or rest of central region (RCR) in the first eight months of 2023, by 5.8 per cent.