SINGAPORE - Landlords of larger HDB flats and private residential properties will soon be able to grow their tenant base and rental income after a policy change takes effect in January to relax the rental occupancy cap for such properties for about three years.
But those who earn more rental income after raising their tenant headcount, and in turn see higher annual values of their properties, will likely be liable for higher property taxes, said Ms Chia Siew Chuin, JLL’s head of residential research for Singapore.
Meanwhile, the policy change could benefit larger households in need of interim housing, lower income groups, as well as students and workers in sectors such as manufacturing, nursing, F&B and retail, analysts said.
These tenants will have the option of sharing a unit with more people and saving on rental costs, said Ms Christine Sun, OrangeTee & Tie’s senior vice-president of research and analytics.
From Jan 22 next year to Dec 31, 2026, owners of four-room or larger flats and private homes of at least 90 sq m will be allowed to house up to eight unrelated people who are not from the same family unit, up from the current cap of six, said HDB and the Urban Redevelopment Authority (URA) on Dec 20.
Ms Chia said some operators of co-living residences may also benefit from this temporary flexibility, as they are governed by the same occupancy cap.
The increased cap could result in landlords charging higher rent for a larger unit with more tenants, but each tenant may end up paying less, Ms Sun noted.
She gave an example of how a landlord of a 5-room HDB flat in Bedok that previously charged $4,200 for six people – $700 per person – may now charge $4,800 for eight people, or $600 per person.
“This benefits both landlords and tenants as each tenant pays less while landlords earn higher overall rent,” she said.
Landlords of smaller homes could be affected if potential tenants switch to renting bigger units with their friends or colleagues, Ms Sun added.
The move is timely as rents have remained elevated. Median rents for 4-room HDB flats jumped to between $3,000 and $4,300 in the third quarter of 2023 from between $2,650 and $3,850 in the fourth quarter of 2022, Ms Chia said.
Similarly, median rents for executive flats rose to between $3,000 and $4,000 over the same period, from between $2,900 and $3,300.
In the suburbs, condo rentals jumped by 65 per cent in the third quarter of 2023 from a low in the second quarter of 2020, she said.
Mr Alan Cheong, research and consultancy executive director at Savills Singapore, said the new measure will likely affect the HDB market more because of greater rental demand from S Pass holders.
Ms Wong Siew Ying, PropNex Realty’s head of research and content, noted that delayed new home completions, coupled with the high number of private non-landed home leasing contracts in 2021 and 2022, could have helped fuel the sharp rise in rents in 2022.
But the increased cap and progressive completion of private homes should help meet leasing demand in the near-term. And when the new class of longer-stay serviced apartments is ready, these homes will cater to those in need of transitional housing, Ms Wong added.
Mr Nicholas Mak, chief research officer of property search portal Mogul.sg, said the policy change should have been made earlier in 2022, when many tenants were feeling the pain of rising rents.
“When Singapore opened its borders in 2022, residential rental demand jumped and rental rates surged by close to 30 per cent that year, this measure should have been introduced then,” he said.
The increased cap could encourage some landlords to use partitions to sub-divide their rental unit into additional rooms in order to squeeze in more tenants and get more rentals, he added.
Ms Sun noted that such a move could affect neighbours as noise levels increase and more people share common facilities such as lifts and condo amenities.
The risk of fire hazards may also increase in subdivided units, Mr Mak said.
“Some tenants may cook in their rooms as they do not want to share the kitchen with other tenants, increasing the risk of fires breaking out. The authorities must conduct surprise inspections of sub-divided units in private properties and HDB flats,” he added.
