http://www.businesstimes.com.sg/arch...wn-39-20140118
Published January 18, 2014
Rental yields of non-landed private homes down at 3.9%
By Mindy Tan [email protected]
RENTAL yields for non-landed private homes fell below the 4 per cent psychological mark at 3.9 per cent in 2013, from 4.2 per cent the previous year, according to the Singapore Real Estate Exchange (SRX).
"For many investors seeking income from residential properties, 4 per cent is a psychological barrier when it comes to rental yields," Jeremy Lee, SRX co-founder and chief technology officer said.
He noted that investors generally seek yields above 4 per cent to justify the risks inherent in property as an asset. "Below 4.0 per cent, investors worry that inflation will wipe out their gains," he said.
Of the 34 planning areas in Singapore, 31 experienced a weakening in median gross rental yields.
Four locations, comprising Orchard, Tanglin, Southern Islands (Sentosa Cove) and Newton, saw gross rental yields below 3 per cent.
"In the prime areas, the cost of homes is out of balance with the rents they command," said Mr Lee. "The homes are relatively expensive because of their location. At the same time, there is downward pressure on rents, caused in part by the shrinking or disappearance of expatriate housing allowances."
On the other end of the spectrum, Outram, Yishun, Geylang, Tampines and Jurong West registered gross yields of 4 per cent or above. The highest yield was seen in Outram, which saw its rental yield go up from 4.6 per cent in the first half of the year to end at 5.1 per cent.
Separately, three planning areas - Downtown Core, Southern Islands and Outram - bucked the downward trend and saw their rental yields increase by 2.5 per cent, 15.5 per cent, and 16.8 per cent, respectively.
This is because while median rentals in these areas have increased, their median transacted prices have fallen, said Nicholas Mak, executive director at SLP International. "For example, in the Outram planning area in 2013, median rentals increased 8 per cent year-on-year, while capital values decreased by 3.7 per cent year-on-year," he said.
"A possible reason for the increase in residential rents in these three planning areas is that they are at the city fringe, and there was very little new supply of completed private housing units in 2013. This shows that rental demand in certain city fringe locations is still healthy," he added.
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