26-1-2024 (SINGAPORE) Rent prices in Singapore have experienced a decline for the first time in over three years, providing relief to tenants amid increased housing supply and expectations of an economic slowdown.
According to the Urban Redevelopment Authority (URA), an index of rents for private homes in the financial hub dropped by 2.1% in the fourth quarter, compared to a 0.8% rise in the previous three months. This marks the first decline since the third quarter of 2020 and the most significant drop since the aftermath of the global financial crisis in 2009.
The decrease in rent prices was observed across all market segments and follows a substantial increase in housing supply amidst rising costs. The URA reports that approximately 21,300 private residential units were completed last year, the highest number since 2016 and more than double the figure recorded in 2022.
Christine Sun, the chief researcher and strategist at real estate agency OrangeTee Group, explains that increased competition has made landlords more willing to accept lower prices, particularly in the luxury segments. Tenants, in turn, are more inclined to explore more affordable options in suburban areas.
While the Covid-19 pandemic brought an influx of wealth to Singapore, enabling the city-state to defy the economic downturn experienced in other hubs like Hong Kong, it also triggered local discontent and subsequent government cooling measures.
Despite the recent cooldown, private residential rents still saw an overall growth of 8.7% in 2023.
Additionally, local demand from buyers has supported home prices, which increased by 2.8% in the fourth quarter compared to the previous three months, resulting in an annual increase of 6.8%, according to recent data.
However, demand has moderated, with the pace of home price increases slowing for the second consecutive year and sales of private residences, including second-hand properties, reaching their lowest point in seven years.
The first two residential launches of 2024 witnessed subdued take-up rates of 17-30%, according to Citigroup Inc analyst Brandon Lee. This is in contrast to an average take-up rate of 46% for projects in 2023, as noted in the report.
Developers are also exercising caution. Recent government land parcel sales received limited interest, with one near the city’s Gardens by the Bay receiving a single bid of S$770 million (US$574 million), nearly 30% lower per square foot than a nearby plot sold last year.
Analysts hold differing views on the outlook for rents and prices in 2024. Bloomberg Intelligence estimates a potential decline of up to 10% in private residential rents due to high vacancy rates and economic headwinds. However, OrangeTee’s Christine Sun believes rents will increase by 2-5% due to reduced housing supply entering the market this year.
Meanwhile, Morgan Stanley predicts a 3% drop in residential prices, while Citigroup expects a gain of 4-5%. Bloomberg Intelligence suggests prices may move sideways with some downside risk.
