Rents set to fall in Singapore in the near future?
After two years of continuous rises, rent prices appear to have stabilised. Prices for rent have stabilized after two years of continuous rises. The rate of growth has remained stagnant for over six months.
A combination of factors like lower demand for homes as well as an increase in the supply of housing have created some issues in renting. The market for rental is facing some headwinds because of factors like lower domestic demand and an increase in supply of housing.
A lot of tenants in 2023 were not able to meet the increasing rents as landlords were able to pass on the higher expenses due to mortgages that are more costly and higher costs of living. After seeing the dramatic increase in rents the renters are at a the point of breaking.
The battle between tenants for homes is beginning to decrease as more condominiums are built in the second quarter of 2023. Since then the mood has softened with a drop in the number of inquiries and visits to homes by prospective tenants.
Are the rents slowing after an increase in quarterly rates?
The market for leasing has seen an abrupt reversal due to the result of the economy’s slowing and the rise in inventory, and the resistance to price hikes. According to the data released by the Urban Redevelopment Authority, 56,098 residential rental agreements (excluding executive condos, also known as ECs) were signed during the first eight months of 2023. This is considerably lower than the 61,801 contracts which were signed in 2021 as well as the 66,603 contracts signed in 2022.
The prime segment, also known as the core central region (CCR) was the most severely affected. Demand dropped by 11.5 percent year-on-year during the first eight months of 2023. Then came the suburbs, or outside of the central region, that saw a decline of 10.5 percent, and the city edges or the remainder of central regions, which saw a drop of 5.8 percent.
In the Covid-19 epidemic, a significant number of residents lived in apartments because of the delays in construction of new housing units. Tenants who waited for their HDB or private units to be finished are making their way to their new homes.
The rate of vacancy for completed residential units for private use has gone up from 6 percent in the first quarter of 2018, and will rise up to 6.3 percent by the end of the second quarter of 2023.
The rent-price disparities between tenants and landlords remain large, which means there are less agreements. Rent prices surpassed records and hit new heights in the second quarter. Rents increased because of the limited availability of housing, meaning that landlords didn’t have to be concerned about losing their tenants.
Certain tenants decided to relocate from Singapore while others opt to lease cheaper homes in the market for public housing.
In some submarkets, the rental market is already beginning to begin to show signs of a correction.
According to URA rent data, the median monthly rental for all condominiums (excluding ECs) was $5.16 per square foot (psf) which is a stagnant rate when compared to a year ago. The median rent were up 14.2 percent over the same time period in the previous year.
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Between February and August 20,23, the median rents of luxury condominiums dropped 2.9 percent, to $5.71 per square foot for a month. In addition, the median rents of condos with city fringes in RCR decreased by 1.3 percent to $5.36 per square foot per month.
However, median rents of condominiums with suburban locations in OCR rose by 2.3 percent up to $4.54 per square foot for a month.
The median price for luxury condominiums is expected to reach its peak in April 2023, which is $6.11 per square foot (psf) per month. This is due to the fact that median rents dropped over the next four months. The rents of RCR and OCR may not have risen to their highest levels. The rents will likely to increase as condos are constructed and owners seek higher rents.
Rent prices are in decline because of the increasing supply. With the constant flow of new homes entering the market, there are now many options for homeowners.
In the first quarter of 2018 there were more than 8000 residential units, which included ECs were built. The number of homes built more than doubled to the comparable periods in 2022 (3.501 units) or 2021 (3.550 units).
The number of housing units in public has also grown because a rising number have passed their minimum occupancy time. As renters in the local area slowly leave the market, existing housing will continue to grow. The increased supply will lessen the fierce renters’ competition to secure homes.
It’s been difficult to accept the fact that there are less tenants to choose from and a greater amount of competition. A lot of landlords have remained loyal to their hefty asking prices despite the slowing of the market and a predicted increase in housing shortage. A lot of landlords are hesitant to lower their asking prices because of the rising prices and mortgages.
The rental volume may decrease further because of the mismatch in expectations of tenants and landlords as well as the fact that the market is in an adjustment period. The slowdown in the season at the close of the year could be one reason.
The trends in rent-price developments in the midlong- and short-term will be heavily influenced by the general performance of the economy. The news that has been negative about the Chinese economy and the aggressive stance of the US Federal Reserve have already affected business confidence.
Certain companies are less confident regarding their plans to hire employees in 2024. Rent prices could be affected by a slowing economy or weaker forecast for the global economy.
The market could be more active in the coming year, if tenants renew or sign new leases with lower rents. Tenants may prefer leases with shorter terms in the event of more rent price adjustments that could result in greater transactions.
Landlords may find positives. The cost of having several properties has increased because of cooling measures that has led to a rise in HDB upgraders to pay rent prior to purchasing an individual home.
Rents could be cut by landlords who sell their homes at a higher price. If the global economy performs better than we expected then we could see expats returning to Singapore and help support the market for rental.