1-6-2023 (SINGAPORE) Luxury home rents in Singapore have skyrocketed due to strong demand from high net worth individuals who are willing to pay a premium, according to analysts.
While Singapore’s property market experienced record-high rents last year, there are indications of a slowdown. Condominium rents increased by 6.2 percent in the first quarter, down from 7.5 percent in the October to December period and 8.3 percent in July to September.
However, rents for landed properties have continued to surge, with a significant increase of 14.5 percent in the first quarter. This growth follows several quarters of consecutive increases, resulting in a year-on-year jump of 39.3 percent.
Professor Qian Wenlan, director of the Institute of Real Estate and Urban Studies at the National University of Singapore (NUS), attributes the sharp rise to two factors: limited supply of luxury homes and strong demand from high net worth individuals.
Due to the scarcity of land, Singapore has a very limited supply of such homes, with the number of landed properties under construction peaking in the fourth quarter of 2012, as reported by the Urban Redevelopment Authority (URA). Since then, the figure has significantly declined.
As of the first quarter, there are approximately 73,000 landed homes in Singapore, which account for less than 19 percent of the total private housing stock. Professor Qian stated that the rental supply of landed houses is inelastic, and the increase in rents depends on the demand from high-end tenants in the market.
The rise of family offices in the past two years has also contributed to the increased demand in the high-end rental market, according to Professor Sing Tien Foo from NUS’ Department of Real Estate. These foreigners, who are not eligible to purchase landed houses, have the financial capacity to afford high rents. This group includes family office members, investors, and senior management of foreign multinational companies relocating to Singapore.
Rents for all three types of landed properties, namely detached, semi-detached, and terrace houses, have spiked since hitting a low point in 2020 during the pandemic. The most significant increase was observed in detached houses, particularly in prime districts 9, 10, 11, and 21, which are home to Good Class Bungalows (GCB). These districts encompass Orchard, River Valley, Bukit Timah, Newton, and Novena.
Between the third quarter of 2020 and the first quarter of this year, median per square foot (psf) rents for detached houses rose by 120 percent, from S$1.70 to S$3.75 psf per month. This translates to more than doubling the median rent for a GCB with a minimum land area of 15,070 square feet, from S$25,619 to S$56,512.50 in less than three years.
Ms. Tricia Song, CBRE’s head of research for Southeast Asia, highlighted that ultra-high net worth individuals and families establishing offices or businesses in Singapore are driving the demand for GCBs or prime bungalows in these sought-after locations. Foreigners who are unable to purchase landed properties due to citizenship restrictions are willing to pay a premium to rent spacious residences that suit their lifestyles.
Furthermore, the limited supply of available landed homes, which are predominantly owner-occupied, allows landlords to command higher rents. New supply is also scarce, with only 887 new landed houses expected to be built by 2027 compared to 51,703 new non-landed private residential units.
While condominium rents are likely to stabilize, Ms. Song suggests that there is still room for further increases in landed property rents. The recent increase in additional buyer’s stamp duty for foreigners to 60 percent may lead more foreigners to opt for renting instead of purchasing, potentially impacting landed properties.
However, Ms. Song anticipates that landed rents will stabilize later this year due to a weaker economic outlook and growing resistance to high rents.
