Rents of private apartments tipped to decline this year

High-rise private apartment condominiums in the Scotts Road and Cairnhill area.
High-rise private apartment condominiums in the Scotts Road and Cairnhill area. ST PHOTO: ALPHONSUS CHERN

Tight immigration policies, fresh supply are factors, say experts

Rents of private apartments are expected to fall further this year amid a flood of new homes hitting the market.

Property firm ERA estimates rents could weaken by 5 per cent to 8 per cent this year, while Savills Research says the decline could reach 10 per cent. Flash estimates from the SRX Property Price Index out yesterday showed that private apartment rents inched up 0.1 per cent last month from November but fell 5.4 per cent compared with December 2014.

The figures for last month mean private rents are 15 per cent below the level in January 2013 and they will remain under pressure due to tight immigration policies and new supply, analysts said.

Knight Frank Singapore expects about 22,300 private homes will be completed this year.

Ms Alice Tan, its head of consultancy and research, said: "We could also see a higher rental downward adjustment for the suburbs, given that the influx of 55 per cent of the new private homes are in the outside central region this year."

The SRX report showed that an estimated 3,093 private apartments were rented last month, down 7 per cent from November but up 6.4 per cent on December 2014.

Analysts said this could be a reflection of more frequent transactions, as tenants prefer shorter leases.

Savills Research anticipates that demand could soften further as companies slash accommodation budgets for expatriate staff, given the weaker economic outlook.

"The investment banks (and foreign banks, they are facing challenging times. They are unlikely to bring in new headcount from overseas, but are likely to shed headcount, so demand is shrinking," said Savills Research senior director Alan Cheong.

Analysts believe declining rents in the private sector will continue to hit public housing rents.

The SRX data showed that rents for Housing Board flats dipped 0.6 per cent from November to last month but were down 4 per cent compared with 2014.

SRX Property said an estimated 1,817 Housing Board flats were rented last month, up 1.5 per cent from November, and an increase of 8 per cent from December 2014.

ERA believes Housing Board flat rental demand is likely to remain resilient, "as some expatriates are facing crimped relocation packages; they have considered renting a HDB flat instead of a private apartment", said key executive officer Eugene Lim.

Real estate agency PropNex expects Housing Board rents to fall by about 3 per cent this year.

Chief executive Ismail Gafoor said this year will remain a "tenant's market", and that landlords should be "rational" in assessing offers.

"For private homes, the time taken to close a rental transaction has doubled. In good times, it was three to six weeks, now the average is upwards of 10 weeks," said Mr Ismail.

A version of this article appeared in the print edition of The Straits Times on January 14, 2016, with the headline 'Rents of private apartments tipped to decline this year'. Print Edition | Subscribe