Rents of condos to reach bottom in the Q3 of 2024 then rise
In 2023 the residential market was split into two halves. In the first six months of 2023, the demand for private non landed homes was strong despite the completions and construction of almost 7,500 units.
Rents rose by 6.2% in the first half of the year. But signs of deceleration appeared in the second quarter. Landlords had to wait longer to find a new tenant. With the job market quiet, private property rents increased for three quarters straight to 2.3% in the second half of 2023.
Affinity Serangoon (1052 units), Avenue South Residences 1 074 units), Kent Ridge Hill Residences 548 units), Riverfront Residences 1,472 units), Riviere, 455 units), and The Woodleigh Residences, 667 units, are just a few of the non-landed residential project that have been completed during H1 2023.
In the second quarter of 2023, conditions on the market began to improve. In H2, the employment market slowed due to an abrupt increase in completions. Rents were flat in the third period, and growth was 0.2 %. For the first quarter since Q42020, rents declined by 1.8 percent in the 4th quarter.
Amber Park (592 units), Dairy Farm Residences (592 units), Kopar (Neith) (378 units), Leedon Green (538 units), Midwood (664 units), Normanton Park (2,870 unit), Parc Clementis (1 468 unit), Sengkang grand residences (680 units), The Florence Residences (1210 units), The M (522 Units) and Treasure in Tampines (2203 units) are some of the large non-landed housing projects that will be completed by H2
Rents declined for two quarters straight in Q3 & Q4 2023. Rents rose steeply in 2021 and displaced tenants to Outside Central Region and Rest of Central Region. At Q4 of 2023, there were 8,494 vacant homes in CCR.
The rents on private non-landed properties rose 6.9% in 2023. That’s a huge difference from the almost 30% increase of 2022.
Seven districts experienced a decline in median gross rental rates for the second quarter in a row in Q3 of 2023. The most significant declines were seen in districts 21 (Upper Bukit Timah; Clementi Park; Ulu Pandan); District 4: Telok Blangah and Harbourfront, and District 26: Upper Thomson and Springleaf.
In District 21 median gross rents declined by 2.9% in Q3 and 8.0% in Q4 respectively to S$4.10/psf/month. This is likely due to a surge in private non-landed housing and tenants being displaced to other areas.
The median gross rents for District 4 dropped 5.7 per cent and 1.1 per percent respectively in the third quarter, to S$5.28/sqf per month. Although there were more private non landed homes being rented out on Sentosa than in other areas, median gross rents based on psf tend to lower.
Gross rents have also fallen in District 26, by 4.8 percent in Q3 compared to S$3.48 psf in Q4. Rents could have been affected because District 26 is a district with older projects.
Rents in two distinct districts have risen. The median rents on private non-landed properties in District 25 – Kranji, Woodgrove – rose 16.5 percent to S$4.61 monthly, while District 22 – Jurong – grew 10.3 percent to S$4.92 monthly.
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Two distinct areas saw rents jump significantly in H2. The District 25 median rents (Kranji/Woodgrove) of non-landed residential properties rose 16.5% in H2 to S$4.61 while the District 22, (Jurong), increased 10.3% to S$4.92 for the same period. In these areas, rents rose due to a lack of supply. Woodgrove estates also saw a rise in demand as they are near the Singapore American School.
Rents jumped 54,7% from Q4 2018, while prices rose only 32.3%. The estimated gross rent yields for non-landed private houses on the island have generally increased as rental growth has outpaced capital values.
Huttons estimated and calculated that the gross rental yield for District 25 (Kranji & Woodgrove), at Q4 2023, was 5 percent. Next was District 22 Jurong at 4.5 %, followed by district 2 Anson, Tanjong Pagar and district 8 Little India (Little India) with 4.2 %.
Rents are predicted to increase in the next couple of years on the backs of lower availability.
Rents are likely to remain low as the market absorbs all the private non-landed housing. The estimated private non-landed home supply in 2024 is 9,636 homes, or half the 19390 units of 2023. In 2024-2028, the average annual housing supply is estimated to drop to 6,789 from 8,119 in the previous five-year period.
A better economic performance in 2024 may lead to an increase in tenant demand. Rental market prices should therefore fall by H2 2024 before recovering subsequently.
In order to meet short term supply requirements, a new type of long-stay serviced apartment was recently launched. It is unlikely that such accommodation would compete directly with standard leases offered to private property owners. Utility and housekeeping are often included in the packages offered by operators of serviced apartments, who also shoulder maintenance costs.
In response to the current supply crisis, the government also announced the temporary relaxation of occupancy caps for larger housing units. The cap will be in place from Jan 22, 20,24 through Dec 31, 2026. The landlords, however, will also have to consider higher property taxes after the tax rates recently increased as well as potential wear and tears due to housing a larger number of occupants. Tenants may have to take into account the inconvenience of having to share bathrooms, kitchens and living spaces with other people. Thus, the impact should be minimal.
District 25 in Singapore (Kranji or Woodgrove), which has not seen a new supply of non-landed residential properties since 2015, may do well for the next couple of years.
The Johor Singapore Special Economic Zone (JSSEZ) is on the way, and completion of the Rapid Transit System by 2026 could strengthen economic connectivity between Johor Singapore. In turn, this could spur more businesses to set up operations in Woodlands, Johor and District 25, thereby boosting the demand for houses in District 25 and the development Woodlands Regional Centre. Rents may continue to rise and capital value increase.
Investors might want to watch out for the launch of a brand new project along Champions Way at Woodlands in 2024.
