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Private home rents on the mend, with some help from en bloc sellers

02 May, 2018

PRIVATE home rents are finally seeing green shoots and could continue to grow this year thanks to the collective sale frenzy.

The rental index edged up 0.3 per cent in the first quarter after 17 quarters of contraction or zero growth, according to Urban Redevelopment Authority (URA)'s statistics released on Friday.

Landed property rentals remained unchanged, compared to a 1.3 per cent decrease in the fourth quarter.

Rents for non-landed properties increased 0.3 per cent compared with the quarter ago's 0.8 per cent decrease.

"The recovery could be partly due to the robust en bloc sale market," said Nicholas Mak, executive director of ZACD group. "When a development is sold collectively, the residents, including tenants, would have to find alternative housing."

Low completions of projects could also help push vacancies down and rents up, said JLL's national director for research and consultancy Ong Teck Hui.

In Q1 2018, 1,977 new private residential units were completed, the lowest since 4Q12 when 1,728 units were completed. In comparison, new completions averaged 4,760 units per quarter between 2014 and 2017.

By region, rentals of Core Central Region (CCR) non-landed properties rose 0.6 per cent compared with the 0.7 per cent decrease in the precious quarter, while rentals in the city fringe, or Rest of Central Region (RCR) declined 0.3 per cent compared with the quarter-ago's 0.7 per cent decrease. (see amendment note)

Rents in the suburbs increased by 0.7 per cent compared with the 1 per cent decrease in the previous quarter.

Lee Nai Jia, research head at Edmund Tie and Company, expects the market to bottom out in H2, especially if displaced owners from en bloc sales cannot find suitable replacements.

"A small proportion of displaced owners are likely to go to the rental market directly to wait for the next cyclical downturn to re-enter the market," he added.

Tricia Song, head of research for Singapore at Colliers International, believes rents could stabilise and recover from the second half of 2018 onwards. Overall, rents could recover by two per cent in the year, she said.

Mr Mak said he expects muted growth in residential leasing demand from expatriates as he believes the government does not appear to be easing its foreign labour policy by much.

Still, he predicts a 4 to 8 per cent year-on-year rise for rentals in 2018.

Amendment note: It was incorrectly mentioned in the eighth paragraph that rentals in the city fringe, or Rest of Central Region (RCR) rose 0.3 per cent compared with the quarter-ago’s 0.7 per cent decrease’. Rentals declined in Q1 2018 by 0.3 per cent.

Adapted from The Business Times, 28 Apr 2018.