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Private housing rents down in May, those for HDB stay flat: SRX

Analysts note private rents and capital values moving in opposite directions

By Lynette Khoo

[email protected]

@LynetteKhooBT

Jun 16, 2016


RENTS of private non-landed homes slipped 0.6 per cent in May while that for HDB flats remained unchanged compared to a month ago, according to SRX Property.

These flash estimates, released one day after SRX Property's price index showed resale prices of non-landed private homes rising for the third straight month in May alongside higher sales volumes, reflect a divergence in how rents and prices are trending.

That divergence did not escape the observation of some analysts. Savills Singapore research head Alan Cheong noted that this trend of stabilising prices and falling rents is expected to continue amid the illogicality of liquidity surplus and a sputtering economy.

"The historical positive correlation between falling rents and prices may be ignored for now or may be overshadowed by buyers' liquidity," he said. "Prices are driven by liquidity, while rents are fundamentally driven by end-user demand or the tenant market which is a reflection of the economy."

Estimates by SRX Property showed an overall 16.5 per cent rental fall in private non-landed homes from the peak in January 2013 and a 5.2 per cent drop from May 2015.

The rental decline for private non-landed homes in May was dragged by a 0.8 per cent month-on-month drop in rents in the Core Central Region (CCR), 0.5 per cent in the suburban areas or Outside Central Region (OCR) and 0.4 per cent in the city fringe or the Rest of Central Region (RCR).

Rental volume rose 5.8 per cent month on month for private non-landed homes based on an estimated 4,400 units rented out in May, representing a 14.4 per cent increase from May last year.

Similarly, HDB rental volumes inched up 1.5 per cent from April to an estimated 2,005 HDB flats in May, a 2 per cent increase from May last year. Rents in mature estates in May dipped 0.3 per cent from a month earlier while that of non-mature estates edged up 0.4 per cent.

ERA Realty key executive officer Eugene Lim noted that rental volumes for private non-landed homes have remained resilient while leasing volume for HDB flats, traditionally an attractive rental option, has remained robust.

But he noticed that demand for private rental homes has come mainly from a reshuffling of existing tenants rather than the influx of new tenants.

He said: "Tenants know that they are in an advantageous position and are capitalising on this window of opportunity to shop around for the best deal. This situation is expected to continue in the short term as the market continues to grapple with the supply-demand imbalance."

He expects the downward momentum in rents of private non-landed units to persist given weaker economic conditions, the on-going transition to be less reliant on foreign manpower and a persisting supply-demand imbalance.

"As majority of the completed units are in the RCR and OCR, they face stronger downward pressure. Landlords are increasingly open to accepting a lower rent as opposed to leaving the unit empty," he added.

R'ST Research director Ong Kah Seng flagged that with many corporates across industries downsizing and letting go of professionals - both locals and foreigners - across ranks, the market is unlikely to see a significant increase in the number of expatriates being seconded to Singapore from mid-year onwards which can translate into more fresh leases being inked. He also attributed the notable decline in CCR rentals in May to weakened leasing demand, as corporates continually cut senior expatriates' housing allowances and hold back hiring senior expatriates to save overhead costs and expenses.

Mr Cheong said that given the current residential oversupply, "investors will have to batten down the hatches and ride through the storm till mid-2017 when new supply starts to peter off".