Rental demand for new condos waning

Eight Riversuites in Whampoa East, one of the larger condominiums being completed this year.
Eight Riversuites in Whampoa East, one of the larger condominiums being completed this year.PHOTO: UNITED ENGINEERS DEVELOPMENTS

Overall rents down in past two years; vacancy rates hit 10-year peak at end of last year

New condominiums used to enjoy pretty firm rental demand but those days have gone.

At the 862-unit Eight Riversuites in Whampoa East, one of the larger condominiums being completed this year, interest is weaker than in the past, agents say.

An agent who is helping about 20 homeowners at the condo to find tenants said he gets about 10 enquiries in a week. 

Just two years ago, he could get as many rental enquiries in a day for a new project, he noted. "Right now, there is a lot of supply with more new projects being completed... Majority of rental demand is from people already in Singapore."

Urban Redevelopment Authority (URA) first quarter data out later this month are expected to show that rents have continued to slide. 

CHALLENGES AHEAD

I forsee challenges for most of the condominiums, especially the ones that are going to complete this year. Many of the buyers were buying for investment.

MR LIM YONG HOCK, PropNex key executive officer.

Savills Singapore research head Alan Cheong reckons they could have fallen about 1.5 per cent in the first quarter from last year and may be down about 6 per cent this year.

Rental decline has already gathered pace, with rents falling 3 per cent in 2014 and 4.6 per cent last year.

The discrepancy could be because developers tend to declare dates for obtaining project temporary occupation permits (TOP) further into the future to give themselves more time.

Projects could then be completed ahead of schedule.

According to estimates, the Central-North area of Districts 19 and 20 - including Bishan, Ang Mo Kio, Hougang, Punggol and Sengkang - is set to see the most supply added of about 8,200 units.

Yet the area appears to be the only one where rents have been stable, rising a marginal 1.7 per cent from June 2013 to January this year, noted Mr Cheong.

Rents fell by as much as 11.6 per cent in the North, or Districts 24 to 28, which include Woodlands, Yio Chu Kang and Sembawang, during the same period.

"Despite recent completions of condominiums in District 19, the expanding population of overseas nationals working in the Seletar Aerospace park could be keeping demand firm," said Mr Cheong.

But while the aerospace sector is still relatively buoyant, properties in the East Coast area could be affected this year as they are home to many overseas nationals working in the hard-hit banking and financial services sector, he added.

Landlords also have to deal with Government moves to tighten the intake of foreign labour, again affecting expatriate demand, while the economic slowdown has taken its toll as well, noted Mr Ong Teck Hui, JLL national research director. Vacancy rates, which hit a 10-year peak of 8.1 per cent at the end of last year, will remain high this year, he added.

Many landlords are unable to get the same rents after a tenant leaves. They must typically lower prices by 10 or 20 per cent, noted Mr Lim Yong Hock, PropNex key executive officer. "I forsee challenges for most of the condominiums, especially the ones that are going to complete this year . Many of the buyers were buying for investment."

Housing Board upgraders who have bought new condos typically hope to rent out their HDB property, which "results in even more supply", Mr Lim added.

A version of this article appeared in the print edition of The Straits Times on April 01, 2016, with the headline 'Rental demand for new condos waning'. Print Edition | Subscribe