Condo rents drop 0.6% in May while HDB rates rise for 35th month; fewer units leased
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The drop in condo rents was a sign that private rental growth has peaked and that rental prices were gradually stabilising.
ST PHOTO: LIM YAOHUI
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SINGAPORE - Condo rents dipped marginally by 0.6 per cent in May, following a short-lived 1 per cent increase in April.
But rents for Housing Board flats continued to climb for the 35th consecutive month, rising by 1.1 per cent in May, indicating resilient demand.
After the growing number of rentals over the previous two months, 5,164 condo units were rented out in May, a drop of 8.2 per cent from the 5,623 units leased in April.
The number of HDB units rented out also dropped by 10.2 per cent, with an estimated 2,857 flats leased, down from 3,183 flats in April, according to flash figures released on Wednesday by property portals 99.co and SRX.
Mr Luqman Hakim, 99.co’s chief data and analytics officer, attributed the fall in condo rental volume to the mismatch in price expectations between landlords and tenants during months of continued rental hikes.
Ms Christine Sun, senior vice-president of research and analytics at OrangeTee & Tie, said that demand may have contracted as a result of these mismatched expectations, leading to a longer time needed to close deals and encouraging some tenants to switch to the public housing sector for cheaper alternatives.
She added that the drop in condo rents was a sign that private rental growth has peaked and that rental prices were gradually stabilising.
Citing the flash figures, Ms Sun said that the marginal increase in condo rents in April was offset by the slight declines in March and May, highlighting that private rental growth has plateaued recently.
ERA Realty Network key executive officer Eugene Lim said condo rents possibly dropped due to the large number of condominiums attaining their temporary occupation permit in 2023.
A total of 19,291 units are projected to be ready for occupancy, according to the Urban Redevelopment Authority, he said, and this anticipated increase in supply may alleviate pressures on the local condo rental market.
Likewise, Mr Lim noted that the decline in rental transaction figures may be due to waning interest among international tenants, in the wake of rental hikes earlier in 2023.
This can be observed by the significant reduction of 10.8 per cent in rental volume for condo units in the prime district, which is an area many international tenants call home.
Additionally, there was a decrease in rental transactions of 10.2 per cent for units in the city fringes, and 3.9 per cent for those in the suburbs.
Huttons chief executive Mark Yip said that the drop in condo rental transactions may be temporary, like how it dipped in March but rose again in April. This could be due to owners keeping their rents high to offset mortgage payments in the current high interest rate environment.
Conversely, in the public housing market, HDB rents have increased by 25.1 per cent on a year-on-year basis, despite the decrease in rental volume.
OrangeTee’s Ms Sun said that this is due to an increase in demand for HDB rental flats, as some tenants shifted over from the private rental market and offered higher rents to secure their units.
This, in turn, drives up HDB rental rates for larger units, such as five-room flats that have inched up by 1.6 per cent compared with April – well above the increase of 1.1 per cent across all flat types.
On a year-on-year basis, five-room flat rental prices also saw the steepest increase of 27.7 per cent in May, compared with other flat types.
Larger four-room and five-room flats accounted for more than 60 per cent of HDB rental transactions in May.
ERA’s Mr Lim attributed this to the fact that many expats and renters have been priced out of the condo market.
He said that as a large HDB flat can easily weigh lesser on one’s pocket compared with a small condo unit, many tenants have made the switch to the HDB rental market.
For instance, a two-bedroom unit at Artra, a condominium in Alexandra, was rented for $7,500 a month, while a five-room HDB flat adjacent to the condo was rented for just $5,000 a month, according to Mr Lim.
99.co’s Mr Hakim expects continued softening in the HDB rental market for the rest of 2023 as more Build-To-Order flats are completed, since many existing HDB tenants will stop renting to move into their new homes.
