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Thread: Outlook for private residential rental market

  1. #1
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    Default Outlook for private residential rental market

    http://business.asiaone.com/Business...23-329779.html

    Wednesday, Feb 29, 2012

    The Business Times

    Outlook for private residential rental market

    By Chua Chor Hoon & Li Jinquan


    RENTAL growth of private residential properties slowed down significantly to 3.8 per cent in 2011 from 17.9 per cent in 2010, according to the Urban Redevelopment Authority's rental index.

    Much of the 2011 rental growth was in the first half (2.5 per cent) compared with 1.2 per cent in the second half. In particular, rents almost stagnated in Q4 with only a 0.4 per cent quarter-on-quarter (q-o-q) increase.

    The second half of 2011 was less optimistic due to the worsening of the eurozone debt crisis with companies reducing expatriate hiring and housing allowances. Rental growth was also hampered by the larger addition to the stock, as around 7,800 units were completed in H2 2011 compared with around 4,600 units in H1.

    Government policies also played a part in the rental market.

    In 2011, the government implemented a series of measures to regulate the inflow of foreign labour. The qualifying salaries for certain employment pass holders were raised on July 1, 2011 and again on Jan 1, 2012. The increase in qualifying salaries not only reduces demand for foreign labour but may also be passed on to the employees in terms of smaller housing allowances.

    Non-landed rents in suburban areas posted the best performance in 2011. According to Urban Redevelopment Authority (URA) statistics, the rental index of non-landed properties for Outside Central Region (OCR) recorded the best performance compared with that in the Core Central Region (CCR) and the Rest of Central Region (RCR) in 2011.

    The rental index for OCR rose 4.7 per cent while that for CCR and RCR increased by 2.6 and 3.5 per cent respectively in 2011. The tighter housing allowances and hefty increase in rents from 2010 led to stronger demand for apartments in the suburban areas which command a smaller rent quantum compared with those in the city areas.

    In addition, the proportion of non-landed completions in the OCR was also smaller compared to the CCR and RCR. Around 41 per cent of the non-landed completions in 2011 were located in the CCR, followed by 32 per cent in the RCR and only 27 per cent in OCR.

    Due to weaker demand coupled with higher supply-side pressure, rental growth of non-landed private homes in CCR has started to moderate; the rental index rose only 0.1 per cent q-o-q in Q4. In comparison, the non-landed rental index for RCR and OCR increased by 1.2 per cent and 0.5 per cent respectively.

    In particular, older properties in the CCR faced competition from the newly completed properties as more units are available for rent and tenants become more selective, preferring newer projects with more up-to-date finishes and facilities.

    Rents in Marina Bay held up better than other micro markets of CCR. The rental performances in different parts of CCR varied in 2011.

    Median rents of residential properties around Marina Bay obtained from URA's website showed that they performed better than median rents in Sentosa Cove. This is likely due to Marina Bay being closer to the tenant pool working in the CBD and the area has many activities and events providing buzz and vibrancy.

    The predominantly smaller-sized units command higher rents on a per square foot basis and attract singles and couples who work around the financial district. The relative inaccessibility of Sentosa can be a major deterrent for tenants, especially if they do not drive to work.

    Condominiums in Sentosa Cove also face competition from the prime districts 9, 10 and 11, where bigger units are also available to cater to the needs of families.

    Rents in the nearby Harbourfront area also held up better than those in Sentosa Cove as they are more conveniently located on the mainland and closer to transportation nodes and retail amenities.

    In the prime districts of 9, 10 and 11, the rental performance was mixed across different projects (Table 1). Based on a basket of condominiums tracked by DTZ Research, rental values of non-landed private homes and luxury condominiums in prime districts of 9, 10 and 11 rose 4.1 per cent and 1.3 per cent respectively in 2011.

    However, the rental market in the prime districts has turned negative in Q4 as rents of non-landed private homes declined by 1.6 per cent q-o-q and those of luxury condominiums fell by 2.6 per cent over the same period.

    Rents to face demand and supply headwinds

    Rental demand in 2012 is expected to be weaker due to lower foreign hiring as a result of a projected slower business climate and tighter government policies.

    This may be mitigated somewhat for a temporary period by the imposition of the 10 per cent additional buyer's stamp duty (ABSD) on foreign purchase as some foreigners who had intended to buy may turn to renting a flat for accommodation. However, they may be tempted back to the purchase market if prices fall.

    Rental growth is also expected to face supply-side headwinds from the large number of completions.

    URA's islandwide private non-landed residential vacancy rate has crept up from 5.5 per cent in Q1 2011 to 6.8 per cent in Q4 2011, as the increase in supply of 11,710 units in 2011 was not matched by the increase in demand of 7,126 units.

    According to URA's statistics as of Q4 2011, 12,639 private non-landed residential units are expected to be completed by 2012, around 22 per cent higher than the three-year historical annual average completion of 10,375 units.

    URA's estimates tend to fluctuate quarter to quarter and may differ from actual completions as developers adjust their completion dates. The annual average private non-landed home completions in 2012-2014 is even higher at around 15,500 units, suggesting a high level of completions in 2012 even if developers were to delay or bring forward completion dates. The three-year historical annual demand is lower at around 8,270 units.
    Rents in the OCR, which have performed best in 2011, are also expected to face supply-side pressure as there are a number of projects to be completed in the suburban areas in 2012. Demand will however be supported by the growing number of tenants with smaller housing budgets.

    With a weaker rental market anticipated in 2012, rents for newer properties in close proximity to transportation nodes will hold up better than the older ones.

    Chua Chor Hoon is head of Asia Pacific Research and Li Jinquan is research analyst at DTZ Non-landed rents in suburban areas posted the best performance in 2011.






  2. #2
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    Luckily already up the rental at my condos. Got another one in July.
    Quote Originally Posted by reporter2
    http://business.asiaone.com/Business...23-329779.html

    Wednesday, Feb 29, 2012

    The Business Times

    Outlook for private residential rental market

    By Chua Chor Hoon & Li Jinquan


    RENTAL growth of private residential properties slowed down significantly to 3.8 per cent in 2011 from 17.9 per cent in 2010, according to the Urban Redevelopment Authority's rental index.

    Much of the 2011 rental growth was in the first half (2.5 per cent) compared with 1.2 per cent in the second half. In particular, rents almost stagnated in Q4 with only a 0.4 per cent quarter-on-quarter (q-o-q) increase.

    The second half of 2011 was less optimistic due to the worsening of the eurozone debt crisis with companies reducing expatriate hiring and housing allowances. Rental growth was also hampered by the larger addition to the stock, as around 7,800 units were completed in H2 2011 compared with around 4,600 units in H1.

    Government policies also played a part in the rental market.

    In 2011, the government implemented a series of measures to regulate the inflow of foreign labour. The qualifying salaries for certain employment pass holders were raised on July 1, 2011 and again on Jan 1, 2012. The increase in qualifying salaries not only reduces demand for foreign labour but may also be passed on to the employees in terms of smaller housing allowances.

    Non-landed rents in suburban areas posted the best performance in 2011. According to Urban Redevelopment Authority (URA) statistics, the rental index of non-landed properties for Outside Central Region (OCR) recorded the best performance compared with that in the Core Central Region (CCR) and the Rest of Central Region (RCR) in 2011.

    The rental index for OCR rose 4.7 per cent while that for CCR and RCR increased by 2.6 and 3.5 per cent respectively in 2011. The tighter housing allowances and hefty increase in rents from 2010 led to stronger demand for apartments in the suburban areas which command a smaller rent quantum compared with those in the city areas.

    In addition, the proportion of non-landed completions in the OCR was also smaller compared to the CCR and RCR. Around 41 per cent of the non-landed completions in 2011 were located in the CCR, followed by 32 per cent in the RCR and only 27 per cent in OCR.

    Due to weaker demand coupled with higher supply-side pressure, rental growth of non-landed private homes in CCR has started to moderate; the rental index rose only 0.1 per cent q-o-q in Q4. In comparison, the non-landed rental index for RCR and OCR increased by 1.2 per cent and 0.5 per cent respectively.

    In particular, older properties in the CCR faced competition from the newly completed properties as more units are available for rent and tenants become more selective, preferring newer projects with more up-to-date finishes and facilities.

    Rents in Marina Bay held up better than other micro markets of CCR. The rental performances in different parts of CCR varied in 2011.

    Median rents of residential properties around Marina Bay obtained from URA's website showed that they performed better than median rents in Sentosa Cove. This is likely due to Marina Bay being closer to the tenant pool working in the CBD and the area has many activities and events providing buzz and vibrancy.

    The predominantly smaller-sized units command higher rents on a per square foot basis and attract singles and couples who work around the financial district. The relative inaccessibility of Sentosa can be a major deterrent for tenants, especially if they do not drive to work.

    Condominiums in Sentosa Cove also face competition from the prime districts 9, 10 and 11, where bigger units are also available to cater to the needs of families.

    Rents in the nearby Harbourfront area also held up better than those in Sentosa Cove as they are more conveniently located on the mainland and closer to transportation nodes and retail amenities.

    In the prime districts of 9, 10 and 11, the rental performance was mixed across different projects (Table 1). Based on a basket of condominiums tracked by DTZ Research, rental values of non-landed private homes and luxury condominiums in prime districts of 9, 10 and 11 rose 4.1 per cent and 1.3 per cent respectively in 2011.

    However, the rental market in the prime districts has turned negative in Q4 as rents of non-landed private homes declined by 1.6 per cent q-o-q and those of luxury condominiums fell by 2.6 per cent over the same period.

    Rents to face demand and supply headwinds

    Rental demand in 2012 is expected to be weaker due to lower foreign hiring as a result of a projected slower business climate and tighter government policies.

    This may be mitigated somewhat for a temporary period by the imposition of the 10 per cent additional buyer's stamp duty (ABSD) on foreign purchase as some foreigners who had intended to buy may turn to renting a flat for accommodation. However, they may be tempted back to the purchase market if prices fall.

    Rental growth is also expected to face supply-side headwinds from the large number of completions.

    URA's islandwide private non-landed residential vacancy rate has crept up from 5.5 per cent in Q1 2011 to 6.8 per cent in Q4 2011, as the increase in supply of 11,710 units in 2011 was not matched by the increase in demand of 7,126 units.

    According to URA's statistics as of Q4 2011, 12,639 private non-landed residential units are expected to be completed by 2012, around 22 per cent higher than the three-year historical annual average completion of 10,375 units.

    URA's estimates tend to fluctuate quarter to quarter and may differ from actual completions as developers adjust their completion dates. The annual average private non-landed home completions in 2012-2014 is even higher at around 15,500 units, suggesting a high level of completions in 2012 even if developers were to delay or bring forward completion dates. The three-year historical annual demand is lower at around 8,270 units.
    Rents in the OCR, which have performed best in 2011, are also expected to face supply-side pressure as there are a number of projects to be completed in the suburban areas in 2012. Demand will however be supported by the growing number of tenants with smaller housing budgets.

    With a weaker rental market anticipated in 2012, rents for newer properties in close proximity to transportation nodes will hold up better than the older ones.

    Chua Chor Hoon is head of Asia Pacific Research and Li Jinquan is research analyst at DTZ Non-landed rents in suburban areas posted the best performance in 2011.






  3. #3
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    Any forumer rented out their property recently. How's the market? Easy to find tenants?

    Need info as current lease is coming up.

    Thanks

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    Maybe in the discussion, you can consider using inflation of 5% as a benchmark.

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    Quote Originally Posted by sh
    Any forumer rented out their property recently. How's the market? Easy to find tenants?

    Need info as current lease is coming up.

    Thanks

    I just rented out my unit in Mezzo recently, have to reduce asking price by a large margin to secure a 2 year lease. Gross rental yield about 5%....way below Soildbuild's projection of 6% when it was launched in 09.


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    5% is very good. 6% is too bullish.

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    Quote Originally Posted by kane
    5% is very good. 6% is too bullish.
    Yah much better than nothing....

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    Passive income with a collateralised hard asset. Not easy to come by these days.

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    Quote Originally Posted by sh
    Any forumer rented out their property recently. How's the market? Easy to find tenants?

    Need info as current lease is coming up.

    Thanks
    Quite easy to find tenants. Got a company lease for 2 years (Japanese couple - managerial position). Location: Tanglin 99LH, one street away from Redhill MRT. 2-bedder 980 sq ft.

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    What's their budget range for such a profile typically like?

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    Quote Originally Posted by kane
    What's their budget range for such a profile typically like?
    Directing the Q to me? I think ard 3500 to 4000 range can get tenants without much difficulty. I have 2 company leases in that price range. I don't buy high-end condos. Mid to low range condos but good size and layout. The advantage of company lease is that the money goes in by direct debit every month. However, you still have to monitor as sometimes there's a c***-up. Especially when the accounts staff change over and during holiday periods. Still it's less hassle than chasing a tenant on personal lease. I have had a number of those and my agent has a headache chasing them for rent periodically. Ang-moh tenants have bad cash-flow management in my experience.

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    Quote Originally Posted by azeoprop
    I just rented out my unit in Mezzo recently, have to reduce asking price by a large margin to secure a 2 year lease. Gross rental yield about 5%....way below Soildbuild's projection of 6% when it was launched in 09.

    5% is based on your purchase price or based on the current market price
    What is the yield if based on current market price?
    Ride at your own risk !!!

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    Quote Originally Posted by chiaberry
    Directing the Q to me? I think ard 3500 to 4000 range can get tenants without much difficulty. I have 2 company leases in that price range. I don't buy high-end condos. Mid to low range condos but good size and layout. The advantage of company lease is that the money goes in by direct debit every month. However, you still have to monitor as sometimes there's a c***-up. Especially when the accounts staff change over and during holiday periods. Still it's less hassle than chasing a tenant on personal lease. I have had a number of those and my agent has a headache chasing them for rent periodically. Ang-moh tenants have bad cash-flow management in my experience.
    Thanks, that's useful to know.

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    Quote Originally Posted by azeoprop
    I just rented out my unit in Mezzo recently, have to reduce asking price by a large margin to secure a 2 year lease. Gross rental yield about 5%....way below Soildbuild's projection of 6% when it was launched in 09.

    5% is good too. mai hiam.

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    Quote Originally Posted by azeoprop
    I just rented out my unit in Mezzo recently, have to reduce asking price by a large margin to secure a 2 year lease. Gross rental yield about 5%....way below Soildbuild's projection of 6% when it was launched in 09.

    Are you the 1st buyer ? I thought Soidbuild give you 6% yield GUARANTEE for 2 yrs ? Are you going to claim ?

    Mezzo was launched in the deep of crisis in end 08/early 09. small developer desperate, not only got IAS also psf is very low <800. 800k 2bd for 5% yield that means rental 3.3k ?

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    3.3k for 2br rental sucks for Mezzo ... WFW 2br just TOP is asking for the same
    Ride at your own risk !!!

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    Quote Originally Posted by phantom_opera
    3.3k for 2br rental sucks for Mezzo ... WFW 2br just TOP is asking for the same
    I would thought it is fairly reasonable given the differences in size and facilities between these 2 projects.

    The bedrooms for Mezzo is pretty small.

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    Quote Originally Posted by phantom_opera
    3.3k for 2br rental sucks for Mezzo ... WFW 2br just TOP is asking for the same
    Mezzo is FH eh, whereas WFW is LH

  19. #19
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    Quote Originally Posted by azeoprop
    I just rented out my unit in Mezzo recently, have to reduce asking price by a large margin to secure a 2 year lease. Gross rental yield about 5%....way below Soildbuild's projection of 6% when it was launched in 09.

    Urs P/F or F/F? Got 1 unit 6%~ P/F, lucky owner.

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    Quote Originally Posted by eng81157
    Mezzo is FH eh, whereas WFW is LH
    Tenant does not care whether FH or LH.

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    Quote Originally Posted by eng81157
    Mezzo is FH eh, whereas WFW is LH
    to a renter FH and LH have no meaning to them. They dont care.

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    Quote Originally Posted by minority
    to a renter FH and LH have no meaning to them. They dont care.
    Why are you stating the obvious??? Definitely tenants dont care. But landlords do. IF i'm a landlord and buying a LH gives me the same yield as a FH. it's a no brainer which one to choose.

    For e.g. u buy a Watertown 99LH can give u 5% yield VS Katong FH or whatsoever gives u the same. If rental income was ur long-term aim, why take WT?

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    Quote Originally Posted by price
    Why are you stating the obvious??? Definitely tenants dont care. But landlords do. IF i'm a landlord and buying a LH gives me the same yield as a FH. it's a no brainer which one to choose.

    For e.g. u buy a Watertown 99LH can give u 5% yield VS Katong FH or whatsoever gives u the same. If rental income was ur long-term aim, why take WT?
    But quantum different, so still need to weigh the 2

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    Are you sure you are able to get 5% yield on a FH at today's prices?

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    Quote Originally Posted by chiaberry
    Are you sure you are able to get 5% yield on a FH at today's prices?
    pity my landlord he only getting 1% yield from me at todays price...

    but then again it could be 10% if he bought 20 years ago...

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    Properties are bought to be kept especially those bought more than 3 years ago. New condo bought today are based on future price but unfortunately rental is not going to move up much.
    Quote Originally Posted by radha08
    pity my landlord he only getting 1% yield from me at todays price...

    but then again it could be 10% if he bought 20 years ago...

  27. #27
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    Quote Originally Posted by radha08
    pity my landlord he only getting 1% yield from me at todays price...

    but then again it could be 10% if he bought 20 years ago...
    Don't need to pity your landlord. He just wants some pocket money while hoarding the land.

  28. #28
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    Landed is not for sale. Pass on as legacy to the next gen.
    Quote Originally Posted by kane
    Don't need to pity your landlord. He just wants some pocket money while hoarding the land.

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    Quote Originally Posted by chiaberry
    Are you sure you are able to get 5% yield on a FH at today's prices?
    MMs FTW

  30. #30
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    if i'm getting the same yield for both FH & LH, i believe anyone would choose a FH logically.

    unless the disparity is large, e.g. 5%-vs-1% for LH & FH respectively, i don't think this would post a conundrum for most prospective landlords

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