New rentals may reshape market
Bumper crop of new homes are in non-traditional areas
By Cheryl Lim
Investors have been putting their money in non-traditional rental districts such as the CBD, and newer estates like Sengkang (above) and Kovan, but the coming surge in new units could see rents in these areas soften. -- ST PHOTO: NEO XIAOBIN
SINGAPORE'S private rental market could undergo a shake-up when a bumper crop of new homes bought by investors are ready for tenants later this year.
One key factor leading the change is that many units bought by property investors are in areas where such investors have not traditionally ventured to.
For years, investors have bought apartments they intend to rent out in fail-safe areas such as districts 9, 10 and 11 - including firm expat favourites such as Orchard, Newton and Holland Village.
The leasing out of upcoming units in less tried-and-tested areas could possibly reshape the rental market, analysts say.
These non-traditional rental districts include newer residential markets such as the Central Business District and newer estates like Sengkang and Kovan.
Data from the Urban Redevelopment Authority analysed by Kim Eng indicates that 40,850 new completed units are expected to hit the market by 2015.
About 9,000 units are due to come on board this year, with close to 70per cent of that number coming from the rental areas outside districts 9, 10 and 11.
With a large proportion of the supply likely to be rented out, analysts expect the new supply will put some pressure on rents.
Recent property market cooling measures have also led to more owners holding onto and renting out new apartments.
This, said Mr Jeffrey Hong, chief executive at GPS Alliance, allows them to avoid the newly imposed high sellers' stamp duty while at the same time generating income from their unit.
This expected surge in units could put homes in these non-traditional neighbourhoods in a more vulnerable position.
Mr Hong said he has already seen signs of softening rents. Homes in district 15 - covering areas like Katong, Siglap and Marine Parade - which previously went for $4,500 a month are now securing an average of $4,000 to $4,300 a month.
Kim Eng analyst Ooi Yi Tung said that if rental demand stays the same, rental rates will need to become more competitive for owners to retain tenants.
This could have a knock-on effect, said Mr Nicholas Mak, head of research at SLP International. He said: 'Landlords with units in neighbourhoods not near an MRT station or other facilities may have to scramble to find tenants.
'This may be more dire especially for condos where there are many smaller units, it will be a bigger pool of competitors trying to fill similar units in the same location at the same time, forcing all owners in that condo to drop their rents.'
Citing homes in Balestier and Geylang as examples, Mr Mak said landlords could even be forced to be less selective over tenants. A large group of unsavoury tenants could lower a property's valuation.
However, analysts agreed that the bumper crop of new homes expected in the newer rental areas will not drastically affect homes in the core-central region.
DWG director Chris Koh said: 'People who are looking to rent in the central area are usually those in high-ranking jobs, who are willing to pay more for high-quality properties in prime areas.'
Instead, homes on the city fringe, like those in Queenstown and Toa Payoh, will be hardest hit.
This, said SLP's Mr Mak, is because they will not be able to compete against the high-quality developments in prime neighbourhoods. At the same time, they will not be priced as low as mass-market rentals in the suburbs.
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