'Rents may drop' with foreign tenant quotas

Only 1 per cent of HDB neighbourhoods and blocks have hit the caps.
Only 1 per cent of HDB neighbourhoods and blocks have hit the caps.ST PHOTO: KUA CHEE SIONG

Agents say this will result from rush to secure tenants before caps are hit

Rents in areas popular with foreigners could fall significantly because of new quotas which cap how many public flats can be sublet to non-citizens, according to property agents.

"If your price is too high, then others who are renting out might get in there first," said Dennis Wee Realty's Mr Jimmy Chua, pointing out that landlords may scramble to secure tenants before the quotas are reached by cutting rents.

On Thursday, it was announced that no more than 11 per cent of units in any single block can be rented out to foreigners to prevent enclaves forming. The limit is 8 per cent for each Housing Board (HDB) neighbourhood.

Only 1 per cent of such neighbourhoods and blocks have so far hit the caps. These areas are in central, Jurong West, Queenstown, Sengkang and Clementi, where rents are some of the highest among Singapore's neighbourhoods. According to Singapore

Real Estate Exchange figures last month, median rents ranged from $2,600 in Jurong West - the highest rent after Bishan - to $2,350 in Sengkang. The lowest was Clementi at $2,300, equal to the islandwide average.

Property agents put the higher rents down in part to the demand from foreigners.

According to Mr Chua, Clementi, an area he focuses on, is popular with IT professionals from India who work nearby.

Vestor Realty agent Florence Tiong said most of her rental clients in Clementi range from foreign nurses and engineers to students from the National University of Singapore. "It will be quite hard to get tenants once the quota is hit," she said.

Dennis Wee Realty agent Chris Tan expects rents to drop even in areas below the caps. But more worrying is what happens when the quotas do bite. "The demand from the market will drop a lot. It's quite a big issue for us because most of the demand in Jurong is from foreigners."

In three years focusing on Jurong, he has had only three Singaporean clients renting HDB flats.

And Vestor Realty agent Henry Tan worries that central towns, such as Toa Payoh and Ang Mo Kio, will eventually reach the quota limits too.

PropNex chief executive officer Mohamed Ismail Gafoor estimates rents may fall by 10 to 15 per cent in areas which have reached their quotas. Century21 chief executive officer Ku Swee Yong meanwhile expects a 5 to 10 per cent drop in affected areas.

Once caps are reached, foreigners may turn to other neighbourhoods or to private property, "especially older apartments which tend to have lower rents than new condominiums", said R'ST Research director Ong Kah Seng.

But those who want to stay in the same area may still do so as the quota applies only to the rental of an entire flat.

Said Mr Ong: "As subletting of spare rooms is not affected by this rule, it will mean more foreigners will eventually 'split up' to rent rooms, instead of jointly renting an entire flat."