Housing rent increases should ease in coming quarters: MAS

SINGAPORE - Residential rent increases should ease in the coming quarters as more homes are completed and rental demand moderates, said a report by the Monetary Authority of Singapore (MAS) on Wednesday.

Demand is likely to abate as

a significant number of residential units are completed

and Singaporeans and permanent residents (PRs) vacate their rental units to move into their new homes.

The study of Singapore’s rental market was conducted by the Ministry of National Development and carried in MAS’ biannual macroeconomic review.

It noted that real estate agencies have anecdotally reported a decline in viewings for rental units and leasing inquiries since the start of 2023.

“Global economic uncertainties and slower growth may also further weigh on sentiments in the rental market,” it added.

Since 2021, rents for Housing Board flats have surged 38 per cent, while those for private homes have shot up 43 per cent, after staying broadly stable in the preceding few years.

The sharp rise in rent

was broad-based, with similar increases across market segments and housing types.

For instance, in 2022, rents of landed private homes rose by 28.1 per cent, while those of condominium units increased by 29.8 per cent.

Meanwhile, rents of five-room HDB flats climbed 29.5 per cent, while three-room flat rents rose by 24.6 per cent.

The report noted that the upward momentum in the residential rental market since 2021 was primarily due to an “exceptional demand-supply imbalance” caused by the Covid-19 pandemic.

“Such market imbalances have already started to ease and will continue to do so progressively through this year, along with the significant housing supply coming on-stream and an expected moderation in rental demand,” it said.

“Accordingly, further residential rent increases should ease in the coming quarters.”

In 2021 and 2022, the housing market was facing extremely tight supply conditions as the construction industry was significantly impacted.

This was coupled with global supply chain disruptions and shortages in foreign manpower and construction materials due to tightened border controls.

The two-month circuit breaker in 2020 and the stringent safe management measures after also affected the subsequent pace at which construction activity could resume.

As a result, there were severe delays to the completion of private and public residential projects islandwide, said the report.

Between 2020 and 2022, about 20,000 private and public homes were completed yearly.

This was about 22 per cent lower than the average of around 26,000 units per year from 2018 to 2019, and about 36 per cent lower than the projected average of 32,000 units per year between 2023 and 2025, said the report.

The supply crunch also coincided with strong rental demand in 2021 and 2022, it noted.

While non-resident rental demand fell during the pandemic, more Singaporeans and PRs sought temporary accommodation while waiting for their homes to be completed.

Singaporeans and PRs accounted for an increase in demand of around 7,000 private rental units in 2021.

This compared with an average annual increase in demand from Singaporeans and PRs of 1,300 private rental units in 2018 and 2019.

That sharp increase in demand outweighed the fall in non-resident rental demand of around 4,200 private units in 2021.

When border restrictions were eased in 2022, the trend was reversed and non-resident private rental demand rebounded to an increase of around 2,300 units, similar to 2019. A similar trend was observed in the HDB rental market.

Other factors that may have contributed to the strong pace of market rent increases include

robust employment and wage conditions.

Looking ahead, MAS said supply-side pressures are easing as the construction industry recovers ground.

Almost 40,000 public and private homes will be completed in 2023, the highest number of annual completions since 2018.

These include around 8,000 private homes, including executive condominiums, completed in the last two quarters, double the average of about 2,000 units completed per quarter in 2021 and 2022.

On the public housing front, HDB is on track to complete 20,000 Build-To-Order (BTO) flats in 2023, which is close to triple the 7,000 BTO flats completed in 2020.

The pace of completion will continue over the next two years, with close to 100,000 private and public homes to be completed from 2023 to 2025.

At the same time, the supply of both public and private homes has been ramped up to cater to the housing needs of the population over the next few years, the report said.