Wave of newly-completed condominiums drives down rents

They are expected to drop further with a surge in supply of homes this year

At Waterbank@Dakota, similar units are going below expectations. -- ST PHOTO: ASHLEIGH SIM
At Waterbank@Dakota, similar units are going below expectations. -- ST PHOTO: ASHLEIGH SIM
At NV Residences in Pasir Ris (above), rents for three-bedroom units have fallen to less than $3,500 a month from $4,000. -- ST PHOTO: RAJ NADARAJAN

A wave of newly completed condominiums is bumping up the supply of rental homes in the market, forcing landlords to lower their asking rents to beat the stiff competition.

More cuts might be on the way as the number of private homes to be completed this year is projected to jump 62 per cent from last year, property consultants say.

At NV Residences in Pasir Ris, which obtained its temporary occupation permit (TOP) in January, landlords of three-bedroom units have lowered asking rents from $4,000 a month to less than $3,500 a month, said Mr Chris Koh, director of property consultancy Chris International.

Homemaker Angelin Loh, 46, who bought her 1,184 sq ft three-bedder there for $1.07 million in January last year, said she was unable to lease her unit for three months after collecting the keys in February.

She found a tenant only after slashing the monthly rent from $4,000 to $3,200.

Ms Loh noted that the rent was just enough to cover her monthly mortgage instalments.

Data from the Urban Redevelopment Authority (URA) last week showed that residential rents rose 0.3 per cent in the April to June period from the preceding three months, the smallest rise in five quarters.

One key reason is the surge in supply. Experts say 16,742 private homes are expected to be completed this year, up from 10,329 units last year.

Around five large-scale suburban projects have obtained TOP in the past six months, adding about 2,600 units to the supply, said ERA key executive officer Eugene Lim.

Even asking rents at older projects are being slashed, added Mr Koh.

Three-bedders at Dakota Residences at Old Airport Road, which received TOP in 2010, have been rented out for $4,700 to $5,000 a month, below landlords' expectations of $5,000 to $5,200, he said.

Next door, at Waterbank@Da-kota, which was completed last month, rents for similar units have also been advertised for $4,700 to $5,000.

Despite lower asking rents, data from CBRE Research shows that the number of new leases signed remained healthy in the second quarter, rising 16 per cent from the previous quarter.

This could be due to demand for interim housing from home owners waiting for construction of their new homes to be completed and from those whose homes have been sold through collective sales, CBRE Research said.

Experts said that given the jump in supply, investors should exercise caution if they wish to buy new units in the suburbs.

They warned that the demand for rental units outside the central region has yet to be tested.

"We might see more expatriates coming to the regional hubs when they are completed, but it will take time for newly completed projects in the suburbs to attract sufficient demand from expatriates," noted R'ST Research director Ong Kah Seng.

Recent URA data showed that suburban mass-market homes made up three quarters of new home sales last month.

SLP International executive director of research and consultancy Nicholas Mak also noted that home owners who have taken up floating interest rates for their mortgage loans might be stretched financially due to potentially higher mortgage rates in the pipeline.

Landlords faced with weak rental demand for their units will still be able to attract tenants if they are willing to price their units below the competition, said Mr Koh.

Mr Mak added that landlords can also consider throwing in incentives like a fresh coat of paint for the unit or furnishing for free.

"It's between deciding how much you want to spend to get that additional rent and simply lowering rents to get a tenant," he said.


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