Latest home rental upticks seen as blips

Consultants do not see the December and January rises as an inflexion from the 10 straight months of decline

By Lynette Khoo

[email protected]


Feb 13, 2016

DESPITE an uptick in rents for private non-landed homes and HDB flats in the last two months based on SRX Property flash estimates, some property consultants note that this does not necessarily signal a clean break from the downward trend in rents.

Much of recent rental transactions have been driven by rental renewals rather than new demand, they argued.

And while rents have fallen by a larger magnitude based on ground feedback from agents, rental indices tend to be "extremely sticky", Savills Singapore research head Alan Cheong said.

On Friday, SRX Property's flash rental index for private non-landed homes showed a 0.2 per cent rise in January this year compared to a month ago - a second consecutive month of increase after a 0.4 per cent rise in December. Rents in January were still some 14.6 per cent lower than the peak in January 2013 and 5.5 per cent below that of January 2015, based on the SRX's rental index.

Consultants do not think this marks an inflexion from the 10 straight months of rental decline since February 2015.

"The magnitude of increase is mild overall. We still have to reserve judgment on whether the two months of successive increase is sustainable and whether it will hold up for the rest of the year," Mr Cheong said.

The inking of shorter term leases, which tend to lock in higher rents than longer term leases, could have lent support to the rental index, he added.

ERA Realty key executive officer Eugene Lim flagged that headwinds remain strong in the rental market, as there will be some 21,906 private residential units to be completed this year, more than the 18,971 completed units in 2015.

Most of the new completions this year are located on the suburban areas, which he expects to see stronger downward pressure.

The rent uplift in January for SRX Property's index for private non-landed homes came mainly from the city fringe or the Rest of Central Region and the suburban area or the Outside Central Region, which saw rental increases of 1.2 per cent and 1.3 per cent, respectively. Private homes in the Core Central Region, however, experienced a 2.4 per cent fall in rents in January from December.

January's rental increase for private non-landed homes was accompanied by more rental transactions, which jumped 15 per cent from a seasonally slow December to an estimated 3,411 transactions but slid 1.2 per cent year on year.

Mr Lim noted that as foreign manpower controls remain tight this year, rental demand is expected to stay low, possibly bringing this year's rental volumes to a similar level as last year.

In the public housing market, rents of HDB flats rose 0.7 per cent in January from December, with month-on-month rental increases registered across all HDB flat types and in both mature and non-mature estates. HDB rents in January were still down 3.1 per cent from a year ago and 8 per cent below the peak in August 2013.

HDB rental volume contracted by 5.4 per cent in January from a month ago to an estimated 1,670 flats - a 17.7 per cent decrease from January 2015.

Mr Lim foresees that the HDB rental market will continue to be dragged by weakness in the private homes market. While HDB rental activities has remained active, most of these contracts have been lease renewals rather than new demand - a situation that will persist for a while.

Observing that the varied leasing landscape cannot be deciphered purely from indices, Mr Cheong posited that some transactions captured in rental indices may involve new apartments that have just entered the rental market, which would not be reflective of the overall rental stock. There is also no available information on how long the units were listed before they secured tenants.