Leasing market still weak but may stabilise next year

[reporter2]

Leasing market still weak but may stabilise next year

Jul 13, 2017

Wong Siew Ying


Tenants are still calling the shots for private condominiums and Housing Board flats, with rents staying flat and lease numbers falling.

At first glance, there was good news for landlords, with private condo rents rising 0.5 per cent from May to June. That reversed the revised 0.6 per cent decline from April to May, but they are down 3.2 per cent on June last year, according to SRX Property estimates yesterday.

International Property Advisor chief executive Ku Swee Yong said: "The increase could be a blip. We still see more property completions adding to the leasing market, and owners are still having difficulty getting tenants."

The rent increases last month were led by the city fringe, where rents rose 1.4 per cent from May.

They increased 0.5 per cent in the suburbs, but those in prime condos in the core central region posted a 0.4 per cent drop last month.

Fewer signed leases also point to the fragile market. There were 4,250 condo units leased last month, down 8.8 per cent on the 4,661 rented in May. However, analysts expect more leases will be signed in coming months following a recent policy change that cut the minimum rental period for private homes from six months to three.

HDB rents slipped 0.6 per cent from May to June, after rising by a revised 0.8 per cent from April to May. SRX said rents were down by 4 per cent from June last year.

There were 1,704 HDB units leased in June, a fall of 5.5 per cent from 1,804 in May and down 11.5 per cent from June last year.

"I think private rents are likely to decline by 3 per cent for the whole of 2017 and HDB rents to drop by about 2 per cent," said Dr Lee Nai Jia, head of research at Edmund Tie & Company. However, analysts say the outlook has improved as rents are declining at a slower pace.

Said OrangeTee head of research and consultancy Wong Xian Yang: "The leasing market could potentially stabilise in 2018, as only 9,014 private residential units are expected to be completed in that year.

"This represents a year-on-year drop of 42.3 per cent from 2017."

[reporter2]

Private apartment rents down 3.2% in June

SRX June flash estimates show HDB rents also fell; analysts see silver lining in lower private home completions

July 13, 2017

Kalpana Rashiwala


SRX Property's June 2017 flash estimates show that rentals of private apartments and condos have eased 3.2 per cent year on year and also retreated 19.1 per cent from their peak in January 2013.

In the public housing segment, rents of HDB flats have also shed 4 per cent year on year and are 13.5 per cent lower than their peak in August 2013.

But all is not gloom and doom, according to some property consultants. The reduced pipeline of private home completions will ease downward rental pressure. Moreover an improving economy and the recent reduction in the minimum-stay period for private homes will increase the pool of tenants and help support private residential rentals.

At least one property consultant has made an even bolder prediction: that rents in prime areas are poised for a recovery by year-end. Savills Singapore research head Alan Cheong predicts that rents of non-landed private homes in the Core Central Region (CCR) will increase 1.5 per cent this year (December 2017 versus December 2016) - a reversal of his earlier forecast of a 5 per cent rental drop.

According to ground feedback from Savills's corporate leasing executives, rents in the CCR had already found a bottom late last year and inched up in Q2 this year over the preceding quarter. "Although rental budgets have been reduced, one important factor that many have overlooked is that for the units that were completed in 2016 and put up for rent, landlords were quick to lower rents to get their units filled," he said.

For CCR tenants whose leases are due for renewal in 2017, quite a few are staying put. "When they first signed their leases two years ago, rents were much higher than today; therefore even if the landlords were to reduce the discounts for renewals, tenants would still end up paying less than they had paid under the old lease," he added.

That said, Mr Cheong expects rents in the city fringe or Rest of Central Region (RCR) and the suburbs or Outside Central Region (OCR) to remain soft for 2017. "There are still a substantial number of owners in recently completed projects who are looking for tenants."

Cushman & Wakefield Singapore research director Christine Li said that the rental market for private apartments and condo units is seeing "some early signs of recovery on the back of better economic prospects".

Moreover, the revival in residential collective sales may also help to boost demand for rental homes as those who have cashed out from successful en bloc sales "could turn to the rental market for a transition while scouting for better deals to buy a replacement home".

Lee Nai Jia, head of South-East Asia research at Edmund Tie & Co, expects the private residential rental market to stabilise and bottom out by end-2017. He notes that the pipeline of private housing units slated for completion is easing significantly. "The pressure on rents from higher vacancies and new completions is likely to diminish."

According to data compiled by URA from its survey of developers, an estimated 15,629 private homes (excluding executive condos) are slated to be completed this year, down significantly from the record 20,803 units last year.

For 2018, completions are projected to decline further to 9,014 units.

Looking back at the decline in private residential rents since 2013, Dr Lee said the primary trigger was the step-up in private home completions, which outstripped the slower growth in foreign workforce.

This sent vacancy rates up, exerting downward pressure on rents, with landlords being more willing to negotiate.

"The pressure from more completions in the private residential market also spilled over to the rental market for HDB flats. In locations where there are more private property completions, the private rents are competitive to those offered by HDB flat owners, and tenants have therefore gravitated towards the private developments," he noted.

Based on SRX Proprety's flash estimates for June 2017 released on Wednesday, rents of non-landed private homes in Singapore rose 0.5 per cent over the preceding month, while rents of HDB flats fell 0.6 per cent over the same period.

SRX's rental subindex for non-landed private homes in the OCR has shrunk 3.9 per cent year on year, a bigger drop compared to the declines of 3 per cent in CCR and 2.7 per cent in RCR.

Islandwide, SRX Property estimated that 4,250 non-landed private homes were rented last month - down 8.8 per cent from the 4,661 units rented in May 2017 and also 7.3 per cent lower than the 4,587 units rented in June 2016.

In the HDB rental segment, SRX's June 2017 flash estimates show that its rental subindex for mature estates has fallen 3.5 per cent year on year - a relatively more resilient performance compared with the 4.5 per cent decline in non-mature estates.

Across the island, an estimated 1,704 HDB flats were rented in June 2017 - down 5.5 per cent from 1,804 units in May 2017 as well as an 11.5 per cent reduction from June 2016.