Singapore has unseated New York as the city with the strongest rental growth globally, after the costs of renting homes here hit a record high in March. The hike even spilt to the Housing Board market, with some five-room flats in Ang Mo Kio and Cantonment Road scoring record monthly rents of over $6,000 a month.
Private rents rose by 9.3 per cent from 2019 to 2021, and escalated further by 29.7 per cent year on year in 2022 – the fastest annual growth since 2007. In the same year, HDB rents rose at their quickest pace in 15 years – by 28.6 per cent.
As mortgage rates, taxes and inflation jumped, many landlords passed the cost to their tenants. Rents were spurred by the return of expatriates, foreign students and permanent residents after the Covid-19 pandemic stabilised and global travel resumed.
Local renters added to the demand pool, such as young couples waiting for their new homes and families selling their property before buying a new unit to avoid the additional buyer’s stamp duty.
Due to rising costs, more tenants have moved to cheaper accommodation. Some even left Singapore, and this has resulted in private rental volumes falling for two straight months since January 2023. As demand continues to shift, new rental trends are emerging.
More renting HDB flats
As more tenants shift downstream for cheaper accommodation, HDB flats are now in greater demand. Total HDB rental transactions rose for two consecutive quarters to 9,113 units in the first quarter of 2023. Over the same period, rents surged by 17.6 per cent.
Many young expats and employment pass holders, especially single executives, shifted to HDB neighbourhoods as paying less is better than having condominium facilities. Those on a budget prefer new flats in the city fringes or resale units near workplaces or MRT stations.
In the first quarter of 2023, demand was highest for three-room (monthly median rents of $2,600) and four-room flats ($3,200) in mature estates, and four-room ($3,000) and five-room ($3,200) flats in non-mature estates. Jurong West, Tampines, Sengkang, Bukit Merah, Yishun, Ang Mo Kio and Bedok are the most popular estates, and their monthly median rents are attractive, at around $2,700 to $3,200.
HDB rental hikes
In February, HDB rental prices hit an all-time high. A five-room flat in Ang Mo Kio Avenue 10 was leased at a monthly rate of $6,500 and this is probably the highest rent ever achieved for a resale flat. Another five-room unit in Cantonment Road was leased for $6,250 in the same month.
Other record rents in the first quarter of 2023 include eight more flats leased for at least $6,000, while another 62 flats were rented for at least $5,000. In total, 894 flats, constituting 9.8 per cent of total transactions, were leased for at least $4,000. No flats were leased at these rates in the first quarter of 2022.
Flats were generally rented out at higher rates. More than 2,500 units were leased for at least $3,500 in the first quarter of 2023, up from 168 units a year ago. Conversely, the proportion of flats leased below $3,000 plunged from 89.3 per cent in the first quarter of 2022, to 48.3 per cent in the first quarter of 2023. Affordable units at less than $2,500 dipped from 66.2 per cent to 26.8 per cent over the same period.
Opting for cheaper condos
This explains why demand remains firm in the suburbs, which saw the highest rental growth compared with the central regions and city fringe areas.
According to data from the Urban Redevelopment Authority, the proportion of non-landed private homes leased in suburban areas or outside central region (OCR) remained stable at 36 per cent in the first quarter of 2023, despite a 35.7 per cent hike in monthly median rents from $2,800 in the first quarter of 2022 to $3,800.
Some tenants may have moved to the city fringes as the rest of central region (RCR) saw a higher proportion of total leases at 35.1 per cent in the first quarter of 2023. Over the same period, monthly median rents jumped by 32.3 per cent to $4,300 in the first quarter of 2023, from $3,250 in the first quarter of 2022.
Comparatively, the proportion of condo leases in prime locations or core central region (CCR) dipped from 31.1 per cent to 28.9 per cent over the same period despite monthly median rents rising slower by 30.4 per cent to $6,000.
More luxury condos were leased at above $10,000 per month in the first quarter of 2023, up by more than 50 per cent year on year to 831 units. Tenants at more than 70 units of three-bedroom condos paid at least $15,000 monthly at several developments such as South Beach Residences, The Colonnade, 3 Orchard By-The Park, The Orchard Residences and The Nassim.
Indeed, a 6,100 sq ft four-bedroom condo at The Marq on Paterson Hill was leased at a whopping $100,000 a month in February.
Suburban condos are hot
Many people are paying $3,500 to $4,500 a month to rent such units. For instance, two-bedroom condos in the suburbs recorded the highest transactions, at 2,382 units in the first quarter of 2023, at a monthly median rent of $3,700. This was followed by three-bedroom condos in the suburbs (2,069 units, $4,500) and two-bedroom units in the city fringes (2,028 units, $4,400).
But smaller units – one-bedroom and studio apartments – seem to be losing their shine. Rental volumes shrunk by 18.2 per cent and across all market segments – CCR (minus 23.2 per cent), RCR (minus 13.2 per cent) and OCR (minus 18.8 per cent) –over the past year.
Shoebox apartments below 500 sq ft registered the lowest market share of 1.8 per cent, and the number of transactions dipped by 19.1 per cent year on year to 317 in the first quarter of 2023. Leasing volume for the largest condos above 1,600 sq ft, which usually command the highest rents, eased by 20.2 per cent to 2,237 units over the same period.
Impact of high rents
Other advanced economies, such as Britain, the United States, Australia, Canada and New Zealand, have similarly seen rents rising rapidly.
As rental affordability plummets, countries with high renter populations experienced wider economic divergence and greater social unrest. Fortunately for Singapore, the number of long-time local renters remains low as we have the highest home ownership rates in the world at nearly 90 per cent. This is due to the accessibility of government-backed public housing flats and generous grants given to first-time home owners.
Nevertheless, persistent high rents may hurt Singapore’s reputation as an international business hub and lower our attractiveness to global talent. An exodus of expats, multinational corporations and foreign students will affect landlords’ rental incomes.
If private rent inflation continues to snowball into the HDB market, lower- to mid-level foreign workers may suffer, impacting the operations of small and medium-sized enterprises and the service, medical, manufacturing and support industries.
However, there could be a short-term respite for tenants as some vacant units may be available when locals shift to their new homes and release their rental premises. Demand may also moderate if the global economy and employment outlook deteriorate.
In the mid to long term, the private rental stock, excluding executive condos, may be tight as completions will dwindle from the bumper crop of 17,427 units in 2023 to 11,215 units in 2024 and 9,405 units in 2025.
Fewer flats may be put up for lease as units reaching their minimum occupation period will ease from a high of 31,325 units in 2022 to 15,748 in 2023, 13,093 in 2024 and 8,234 in 2025
Barring recessionary risks and unforeseen events, rent prices may grow by a slower pace, between 13 per cent and 16 per cent for private homes, and between 15 per cent and 18 per cent for flats in 2023.
“Source:[Demand causes rents for some 5-room HDB flats to soar to over $6,000] © Singapore Press Holdings Limited. Permission required for reproduction”
