Lean times are here to stay for Housing Board landlords, with rentals likely to stay depressed for the rest of the year.
Sluggish demand, arising from foreign labour curbs that have shrunk the pool of tenants, combined with a rising supply of HDB flats, will weigh on rental rates, said property analysts.
Already, Singapore Real Estate Exchange data shows the HDB rental index has fallen 2.3 per cent since the start of the year, hitting a three-year low last month. The median rent was $2,300.
This is only the beginning of a continued slowdown, said property analysts.
ERA Realty key executive officer Eugene Lim expects a further 5 per cent to 6 per cent drop by the year end. R'ST Research director Ong Kah Seng predicts a full-year fall of 5 per cent to 7 per cent, and SLP International Property Consultants research head Nicholas Mak, one of 4 per cent to 6 per cent.
For the longer term, OrangeTee research head Christine Li sees a decline of about 10 per cent by the end of next year.
Property agents said the problem is simply a lack of demand due to a shortage of tenants.
"Landlords are realistic as the market is not doing very well," said ERA Realty agent Noel Lu.
Many have been adjusting their rentals downwards, said agents.
The worst-affected areas are those without easy access to amenities such as public transport.
However, demand in mature estates and those near MRT lines is continuing to hold up, said ERA agent Zola Tan.
Tenants for units in such areas can be found within a month, as opposed to two to three months for less popular areas, he added.
For instance, PropNex Realty agent Michelle Lai, who focuses on Woodlands, noted that demand is "still quite strong". But although tenants can be found, rents have been falling, she said. An executive apartment used to go for $2,700 or $2,800 a month; now, the rate is $2,500.
The one bright spot is that falling rents have boosted activity in the market so far this year.
There have been more rental deals in general, with 8,485 in the January to March period and 8,455 in the March to June period.
This is up from an average of 7,580 a quarter last year and 6,780 a quarter in 2012.
Woodlands, Jurong West and Tampines have seen the most rental transactions in the past month, based on an STProperty "heat map" using HDB data.
One reason for the flurry of activity is that low rents have attracted more tenants, said R'ST Research's Mr Ong.
Landlords have had to offer low rents to compete for tenants, whose numbers have been affected by foreign labour curbs. The surfeit of flats for rent also means tenants can pick and choose.
"Nowadays, tenants can be fussy," said a 32-year-old safety officer who wanted to be known only as Mr Chandran. He has been trying to rent out his four-room flat near Ang Mo Kio MRT station, but has received just one call in the past fortnight.
With more suburban condominiums due to be completed next year, competition will only rise, said Mr Ong.
He noted: "(Current upgraders) have to quickly secure a tenant for their flat in case there are more flats put up for subletting."
Falling rents in the private market are also putting pressure on HDB rents. Last month, non-landed private residential rents hit a 38-month low.
"Suburban condos both new and old are competing for tenants, with budgets of around $3,000," said ERA's Mr Lim.