http://www.businesstimes.com.sg/real...est-since-1998
S'pore empty homes may climb to highest since 1998
Increasing number of apartment vacancies is putting pressure on some landlords and giving the upper hand to tenants
19 Jan
SAM King had a pleasant surprise when the lease on his Singapore apartment came up for renewal late last year. For the first time in six years, Mr King was able to negotiate a lower rent with his landlord.
"It has turned into a tenant's market," said the 29-year-old sales director at an aviation services company, who got a 10 per cent reduction in the rent on his two-bedroom penthouse in the east of Singapore. His landlord also agreed to split some renovation costs, and provide new curtains and lights.
As Singapore's property market cools following five years of price gains, the number of empty apartments is on the rise, putting pressure on some landlords and giving the upper hand to tenants like Mr King who are renegotiating their leases. Vacancy rates for private residential homes rose to 7.1 per cent during the quarter ended Sept 30, up from a low of 4.6 per cent in March 2010 and the highest since March 2006, data from the Urban Redevelopment Authority showed.
Some landlords, facing tighter lending curbs and a more competitive rental market, have defaulted on their mortgages, leading to a fivefold jump in the number of properties put up for auction by the banks. A total of 159 apartments or houses were auctioned last year, up from 32 in 2013, according to auction data from real estate broker Colliers International.
With fewer expatriates coming to live in Singapore due to controls on immigration, and a large number of apartments set to be completed in the next two years, the vacancy rate could rise further in 2015, bringing rents down even more.
"We may hit almost 10 per cent by end of 2015 as completions are coming faster than the time now taken to find a tenant," said Alan Cheong, a Singapore-based director at broker Savills plc. Even in the depths of the Asian crisis of 1998, when Singapore property prices plunged 34 per cent, apartment vacancies topped out at 9.7 per cent, Mr Cheong added.
More defaults are also probable, though for the moment it's only a small proportion of landlords who are facing difficulties with their mortgages. Less than 0.5 per cent of all mortgages were in default, according to the Monetary Authority of Singapore's latest financial stability report, published in December. Those in arrears made up less than one per cent of mortgages.
Landlords with multiple properties are most exposed to the softening rental market. With resale prices falling as well, they often can't recoup the price they paid for properties they are unable to rent out.
"The cooling measures have affected homeowners' ability to sell," said Sharon Lee, director and head of auction at the broker Knight Frank Singapore. "The current large supply of homes available for rent has also caused rental rates to decline and it could have affected some buyers' ability to refinance or service their loans."
Singapore's home prices fell 4 per cent in 2014, the first year-on-year decline since 2008. The government in 2013 added to its five-year campaign to rein in property values with some of the strictest measures, including capping total debt repayments at 60 per cent of a borrower's income.
Meanwhile, more restrictive policies on hiring expatriates have curbed demand for home rentals at a time when the supply of new apartments is on the rise, said Ong Teck Hui, the national director of research at broker Jones Lang LaSalle.
More than 20,000 new private homes will come onto the market in 2015 and again in 2016, up from about 17,911 in 2014, according to the Urban Redevelopment Authority.
The government has clamped down on expatriate hiring after losing votes on the immigration issue in the last election in 2011.
The number of employment passes issued in the first half of 2014 rose only 0.9 per cent to 176,600. That compares with a more than 20 per cent jump in such passes in each of the two years to 2011, data from the Ministry of Manpower showed. Passes issued fell 0.9 per cent in 2012 and rose 0.7 per cent in 2013.
Prime residential rents could fall another 10 per cent this year, after a similar drop in 2014, Mr Ong added. BLOOMBERG
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