Private condo rents will likely face greater headwinds during H2 2024
The private housing market is expected to decrease in 2024. Nearly 10,000 new homes are scheduled for completion. The number of units completed will decrease to 5,500 in 2025. She believes that rents will likely be lowest this year and the competition to find tenants may lessen in the second or third half of this year. In HDB flats this year, only 11,952 units are expected to reach the five-year Minimum Occupancy Period (MOP) mark, a decrease of 23,1 per cent compared to 2023.
Affordability
HDB rents could increase by as much as 8 per cent in 2019 due to the lower number of flats being built and tenants seeking affordable alternatives, since private housing prices are still high.
The tenants who have a smaller budget are usually a mix between foreigners (such Employment Pass holders) as well as locals. These include families that are waiting for their new or Build-To-Order homes to be finished, or ex-private home owners who must wait out the 15-month period.
It is possible that the increase in demand for HDB flats, which are more affordable than private homes, was due to a sharper rise in rental prices in previous years.
Housing allowances are not paid to 90 per cent (or more) of the foreign employees in Singapore. These tenants will only consider renting a home that is within 30 to 50 percent of their income. It is possible that some tenants of condos in the middle size have decided to move up to HDB apartments.
Some tenants also prefer to rent flats that are newer and centrally located which just have reached their MOP. They value convenience and affordability more than condo amenities, she said.
The rental difference between a HDB flat and a condo unit of the same size (1,000 sq ft) could range anywhere from 6.3 percent to 29.4 percent within the exact same location.
HDB towns where more new private projects have been completed are seeing a smaller price gap between HDB rentals and condo rentals.
In March 2023, a three bedroom unit at Alps Residences (S$5,000), compared to a four-room HDB apartment in Tampines West (3700 S$), had a (rental gap) of S$1,300. The difference today is S$1,000.
Private condos with two-bedroom units tend to be more popular than HDB flats.
Lease term
The normal lease term is usually two years for a private or HDB unit.
Many tenants prefer to sign a year-long lease, believing that rents may be reduced in the near future.
Landlords on the other side prefer tenants to sign two-year contracts in order to feel secure. We’ve also seen instances where tenants were interested in leasing for six-months. Depending on how flexible the landlord is and for how long the unit had been vacant, they may be willing to accept a lease of six months.
Most landlords do not offer extras to tenants or refurbish their property to make it more attractive. The extras might help secure a quicker tenant, but may not translate into better rentals. Rental prices are heavily influenced based on recent sales in the area.
Renting out newly completed condos can be a tough task, but the key is location, and how much competition there is in the immediate vicinity as well as within the project.
Mega projects have a large share of the rental market. In the Tampines area, 62 rental agreements were signed at Treasure at Tampines. This represented a third rental activity.
Parc Clematis has 1,468 housing units. The project had 49 contracts for rental, representing 30 percent of the total rental activity in Clementi’s planning area.
Mega projects often have larger units, between 900-1,000 sq ft. These tend to be more expensive than the average monthly rents for their planning areas.
The older units, which are bigger than those just completed, are still in great demand.
The leasing process may be longer for units that are older and not in good condition. Some of these units may have been on the market longer than six months, but with little response.
The difference in rents for newer and older homes. Last month, a three bedroom unit completed in 2017 at Amber Skye was rented for S$5,800. However, a unit of the same size at Coastline Residences that will be finished in 2023, could rent for S$6,800. This highlights tenants’ preference for more recent developments.
While some owners may find it difficult to lease out their apartments, most landlords have invested a lot of time and money in buying their properties as investments, and are therefore reluctant to sell them.
Some owners bought their properties when the Additional Buyer’s Stamp Duty was not yet introduced or at a lower rate, and may therefore not be so willing to part with them.
The good times are still here for HDB (Housing and Development Board) flat owners, but not private home owners.
SRX released figures earlier this month showing that the index of rental prices for the non-landed housing market in February fell due to a surplus last year. The index decreased by 1% from January and marked a net growth of negative 13 months.
Last month, the HDB rental index reached a new high of 137.5. The Chinese New Year holidays impacted both HDB flats and condo rentals in February.
Analysts predict that the HDB market will maintain its momentum of growth, while the recovery for the private rental market might take longer. ERA projects that private home rentals will decline by 5 per cent by 2024. HDB rents, however, are forecast to rise this year.
Source
Private home rental is expected to be subdued due to recent increases in private housing completions and affordability issues.
In 2023 a record number of 19,968 private residences (excluding executive condominiums, or ECs), were completed. This number is significantly higher than the 9,526 finished units in 2022. In fact, it represents the highest rate of completion for private residential property (excluding ECs), since 2016. Despite the slowdown in new home construction, it is not surprising that completion rates are still low.
