The rental price gap between Housing Board flats and condos has narrowed substantially. Rents of private units have fallen for over six months, while HDB rents have remained stable, and even reached new highs in the same period. This has resulted in a discrepancy in the market performance of both housing types.
If these trends continue, renting a private home may become more appealing than renting an HDB flat, especially if tenants are willing to compromise on space in exchange for the added privacy that a private home can offer.
Tenants may alter their priorities and preferences soon. Landlords and property owners need to be aware of market changes and adjust their strategies accordingly. This may help them mitigate the risk of prolonged vacancy periods.
Declining private rents
The private rental market has softened rapidly, prompting more landlords to accept lower rents to avoid leaving their units vacant. This contrasts starkly with two years ago when a unit would get more than 20 viewings daily, and homes could be leased within a week. Now, it may take up to two to three months for a property to be leased out, with some units, particularly the older or poorly maintained ones, remaining unoccupied for over six months.
A higher supply of private properties has weighed down rents, as over 29,000 homes were completed in 2022 and 2023. A sharp contraction in domestic demand further aggravated the situation, with many locals leaving the leasing market after moving into their new homes. In addition, a drop in expatriate demand has made the market challenges more pronounced, as multinational corporations, tech firms, start-ups and financial institutions have been restructuring over the past year.
After peaking in the third quarter of 2023, monthly median rents for condos have been on a downtrend, dipping from $4,550 to $4,500 in the fourth quarter of 2023, and to $4,300 in the first two months of 2024, data from the Urban Redevelopment Authority shows.
The steepest decline in private condo rents was observed in the prime core central region (CCR), which fell by 5.6 per cent from the third quarter of 2023 to the first two months of 2024. This was followed by the suburbs, or outside of central region (OCR), at 5 per cent, and the city fringe, or rest of central region (RCR), at 3.3 per cent.
The median rent for condos in some districts fell more steeply than in others. For instance, District 5 (Pasir Panjang, Hong Leong Garden, Clementi New Town) saw a substantial fall of 10.9 per cent, from $4,600 in the third quarter of 2023, to $4,100 from January to February 2024. District 13 (Macpherson, Braddell) dipped by 9.1 per cent, while District 18 (Tampines, Pasir Ris) and District 4 (Telok Blangah, Harbourfront) saw a 7.7 per cent drop in median rent.
For the prime segment, District 10 (Ardmore, Bukit Timah, Holland Road, Tanglin) saw the biggest fall of 6.9 per cent, from $6,900 to $6,425, over the same period.
HDB rents hit a new high
The rental market for HDB flats is exhibiting a different trend compared with the private rental market. Based on flash estimates from SRX-99.co, HDB rental prices are rising gradually and reached an all-time high in February 2024.
Median rents for three-room flats saw the highest rise, with a 12 per cent jump in the first two months of 2024, against the same period in the previous year. Similarly, there was a rental growth of 10 per cent for four-room flats, 9.1 per cent for executive flats, 5.5 per cent for five-room flats, and 4.5 per cent for two-room flats, based on rental caveat data from HDB.
Also, 43 HDB flats were leased for at least $6,000 per month to date, with two units rented out for over $7,000 per month. In November 2023, the highest monthly rent of $7,600 was posted for a five-room flat at Tanjong Pagar Plaza (central area). In September 2023, a five-room flat in Geylang, situated in Pine Close, was leased for $7,400 per month.
These findings suggest that the HDB rental market is growing steadily, and rents have hit new records in certain locations. This is due, in part, to the resilient demand for HDB flats and a limited supply of stock. Many tenants opted for HDB flats as they are still more affordable when compared with private homes, whose rents have risen due to inflationary pressures and increased taxes.
Also, the number of HDB flats that have fulfilled their five-year minimum occupation period (MOP) requirement has fallen, resulting in fewer such units available for rent. In particular, the number of MOP flats fell from 30,920 in 2022, to 15,549 in 2023.
Comparing rents
The rental price gap between HDB flats and condos has been narrowing. More tenants may move back to condos, which may pave the way for a gradual private rent recovery.
Although overall rents have hit new highs, the total number of flats leased at higher prices has declined in 2024. This suggests that fewer tenants are willing to pay high rents for HDB flats, and they probably found alternatives in the private market.
For example, 157 flats were leased for a monthly rent of at least $4,500 in the first two months of 2023, but only 114 units were leased during the same period in 2024. Similarly, the number of flats leased for at least $5,000 per month fell from 60 to 21 over the same period.
If we compare rental prices, the gap between HDB flats and condos has closed. In the third quarter of 2023, the median monthly rent for private homes, at around $4,550, was $1,450 more than the median monthly rent for HDB flats at $3,100. But in the first two months of 2024, the rent gap between private homes and HDB flats tapered to $1,200.
As private rents become more competitive, some tenants may shift from renting larger flats to smaller two- or three-bedroom condos in the suburbs. Based on transactions in the first two months of 2024, the median monthly rent for a two-bedroom condo in the suburban OCR was about $3,600, which is comparable to the monthly rental rate for a five-room or executive flat, at around $3,500 to $3,600.
If tenants require a three-bedroom unit, smaller units of around 800 sq ft to 1,200 sq ft were leased for $4,000 or lower between January and February 2024. Such units can be found in District 26 (Upper Thomson, Springleaf), District 17 (Loyang, Changi), District 28 (Seletar), District 23 (Hillview, Dairy Farm, Bukit Panjang, Chua Chu Kang) and District 27 (Yishun, Sembawang).
Outlook
As the price disparity between private and HDB rents narrows, the market may experience a shift in tenant behaviour. Some may return to the private market, while others may move from the city fringe to prime locations.
The impending market competition may put some downward pressure on the HDB rental market. Still, a significant price correction can be avoided, owing to the limited supply of MOP units, which is expected to fall to 11,952 by year end.
Demand for larger flats is expected to remain robust due to the relaxation of the occupancy cap for such units, allowing up to eight unrelated individuals to reside in a single unit.
“Source:[Tenants may find lower rents for condo units as vacancies rise] © Singapore Press Holdings Limited. Permission required for reproduction”
