Private home rents are expected to fall in the second half of 2023
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Based on Savills Research, private residential rents are likely to fall in 2H2023, despite an 7.2% q-o-q increase in 1Q2023 on the basis of URA information.
In spite of the rise in private residential rents the consulting firm suggests a slowdown in the market for leasing, with URA figures indicating that the private rental market declined 11.7% y-o-y during the first quarter, and HDB rental applications dropped 5.2% y-o-y. “[The numbers indicate] that demand is slipping more due to economic reasons than the high cost of renting which are driving foreign buyers to Singapore,” Savills states in a study.
The decrease in the volume of private housing leases represents a second straight quarter of declining. It’s also the least volume of the first quarter in the past six years.
Additionally, the rents for premium non-landed residential properties that are monitored by Savills increased by 4.7% q-o-q to $6.11 per square foot in 1Q2023, which the company states is slower of growth than the three prior quarters. Savills adds that, from mid-February onwards the market has experienced “pockets of slack that are increasing in the rental market” in particular for properties with a rent that are less than $10,000.
In the future, the company believes that rents will fall because the number of new homes grows. A total of 17,600 homes that are private are expected to be built this year, as opposed to 9000 units expected to be completed by 2022. In terms of demand, the economic issues that affect tech companies and other businesses could also affect from the need for renting properties from foreign workers.
“With more private residential projects to be completed through the entire year rent pressure is expected to ease. This should provide both locals as well as expatriates more peace of mind in regards to their lodging plans in Singapore,” remarks Marcus Loo Savills Singapore’s CEO. Savills Singapore.
In the meantime, Alan Cheong, head of research and consulting of Savills Singapore, says the firm has maintained its forecast for growth in rental rents through 2023 of 5-% or 10% for privately owned property in the middle-tier and mass market. For apartments with luxury, Savills predicts rents may rise by 10% up to 15% in the coming year. “This is a result of high-net-worth foreigners who, as a result of this new 60% additional Buyer’s Stamp Duty (ABSD) charge could decide to lease in the meantime, while they wait for permanent residence as well as Singapore citizenship,” he adds.