http://www.businesstimes.com.sg/real...than-hdb-flats
July condo rents fall more than HDB flats
SRX Property data shows leasing volumes for private condos up 18% y-o-y in July. Tenants taking shorter leases
By Kalpana Rashiwala
[email protected]@KalpanaBT
Aug 15, 2015
THE rental decline for private apartments and condominiums has been much more pronounced than that for Housing & Development Board (HDB) flats, latest data from SRX Property shows.
Within the private segment, rentals in the Core Central Region (CCR) eased less than those in the suburbs or Outside Central Region (OCR). It is a similar pattern in the HDB rental market, with a smaller drop for flats in mature estates (seen as more prime areas) than non-mature estates.
Knight Frank chairman Tan Tiong Cheng noted that in mature estates, there is less supply of HDB flats put up for leasing by their owners, who would prefer to live in the units themselves given their central location.
For these same reasons, rental demand tends to be generally stronger for flats in mature estates, he added.
Based on its flash estimates for July 2015, SRX Property's rental index for HDB flats in mature estates has eased 1.1 per cent year on year - compared with a 1.4 per cent fall in non-mature estates.
Rents for non-mature estates peaked earlier, in October 2012, than those for mature estates (February 2013). The drop from the respective high has also been less in mature estates - at 5.3 per cent, compared with an 8.8 per cent contraction for non-mature estates.
Based on the July 2015 flash estimates, SRX's overall HDB flat rental index is down 0.7 per cent year on year and 6.1 per cent from the peak in August 2013. These declines are much less than the falls in overall rents for non-landed private homes - to the tune of 5.7 per cent year on year, and 12.5 per cent from the January 2013 peak.
SLP International executive director Nicholas Mak suggested this could be due to the "growing pool of leasing demand for HDB flats from new immigrants and foreign white-collar workers - which helps to keep the rate relatively more stable".
Based on the July flash estimates, rents of private apartments and condos in CCR are down 5 per cent year on year, a slower pace of decline than the 6 per cent drop in OCR. CCR comprises the Downtown Core Planning Area, the old postal Districts 9, 10 and 11, and Sentosa Cove.
In the city fringe or Rest of Central Region (RCR), rents have retreated 5.3 per cent year on year.
Another trend that emerged in SRX's data is that rents in OCR were the earliest to peak - in January 2013, followed by RCR (February 2013) and CCR (July 2013). From these respective highs, rents have retreated to the tune of 12.9 per cent in OCR, followed by 12.2 per cent in RCR and 11.1 per cent in CCR.
Mr Mak reasoned that this reflects a flight-to-quality by tenants relocating from the suburbs towards the city. "As a result, rental rates for private apartments and condos that are nearer to the city centre decreased less than those in areas further away."
The 0.3 per cent month-on-month contraction in overall non-landed private residential rents in July marked the sixth consecutive monthly drop. Rents have continued to come under downward pressure due to the cocktail of rising supply and capped demand, noted Wong Xian Yang, senior manager, research and consultancy, at OrangeTee.com.
Based on Urban Redevelopment Authority data, 9,945 private homes received Temporary Occupation Permit (TOP) in the first half of this year; this is very close to the average annual completions of 10,863 units over the past 10 years (2005-2014).
"Demand has remained tempered due to tight foreign labour conditions in Singapore. For example, according to data from MOM (Ministry of Manpower), the number of employment pass holders increased by 3,800 in 2014. This is a stark contrast compared to 2011, when it grew by 32,100," added Mr Wong.
The overall HDB rental index dipped 0.1 per cent month on month in July after inching up 0.1 per cent in June.
R'ST Research director Ong Kah Seng said: "HDB flat rents are expected to continually dip in 2015, due to an increase in the number of flats put up for subletting - as more flat owners move into completed suburban condos and start looking for a tenant for their HDB flat. This will lead to an up to 5 per cent fall in HDB flat rentals in 2015; by year end, rents will better match tenants' affordability."
This will produce a knock-on effect on the private residential market.
"As long as the private residential sector is facing depressed rents, we expect rents in the HDB market to continue exhibiting the same trend," argued Eugene Lim, key executive officer at ERA Realty.
Based on SRX's estimates, rental contracts were inked for 1,692 HDB flats last month, almost unchanged from 1,698 units in July 2014.
For private apartments and condos, leasing deals were entered into for an estimated 4,147 units in July, up 18.2 per cent year on year.
"We do not attribute the rise in volume to new demand; but rather it is likely to have come from existing tenants moving (in favour of) better-quality apartments or cheaper rents. This is primarily due to increasingly more projects being completed, resulting in more choices being available to the existing limited pool of tenants," reckoned ERA's Mr Lim.
He also highlighted the trend of increasingly more tenants opting for a one-year lease agreement in recent times, instead of a two-year lease, which used to be the norm. This strategy enables tenants to capitalise on the decline in rents as more and more new homes are completed.
"Looking ahead, it is likely that tenants will move around to the properties with competitive rental rates and hence we can expect the volume of leasing transactions to remain resilient," he added.
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