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Property News11 Jan 2018

Sluggish housing rentals may find footing in second half of 2018

SINGAPORE'S housing rental market remained sluggish last month, but full-year rental declines in 2017 were more moderate than the year before. This confirmed the view of most analysts that notwithstanding the rental market's continued languor, rents will gradually find their footing in the second half of this year.

Singapore overview

Rents of private non-landed homes slipped 0.3 per cent in December from a month ago, bringing the full-year decline to 0.5 per cent. HDB rents also marked a 0.6 per cent fall in December from November, bringing the full-year decline to 3.5 per cent.

These figures are flash estimates from SRX Property, which supplements property transactions data from the government with pre-caveat transactions from 14 major real estate agencies.

This continued rental slide coincided with a recovery in private home prices. SRX Property's resale price index for private non-landed homes marked a full-year rise of 6.2 per cent in 2017; its resale price index for HDB flats slipped 1.8 per cent in 2017.

Official flash estimates from government agencies showed private home prices appreciating by one per cent in 2017, thanks to a recovery in the second-half of the year, while HDB resale prices skidded 1.5 per cent for the full year.

Last month, the full-year drag in SRX Property's rental index for private non-landed homes came from the city-fringe and suburban areas, as reflected in a 0.4 per cent drop in the Rest of Central Region (RCR) and a 1.1 per cent decline in the Outside Central Region (OCR). The Core Central Region (CCR) saw a 0.1 per cent rise in rents for the full year.

For HDB rentals, non-mature estates were less resilient as rents fell by a larger 4.4 per cent for the full year, compared to the 2.7 per cent decline in mature estates, SRX Property's estimates show.

The seasonally slow month of December also saw a contraction in rental transactions. An estimated 1,414 HDB flats were rented in December, a 23.1 per cent decrease from November and a 21.2 per cent drop from a year ago. Some 3,188 private non-landed units were rented in December, representing a 20.2 per cent drop from the preceding month and 15.3 per cent lower than a year ago.

Consultants are expecting the rental market to improve from the second half of this year. Knight Frank head of consultancy and research Alice Tan said that private home rents could see a recovery towards the later half of 2018 as new completed supply tapers off and there could an improvement in workforce growth with better economic prospects.

She is expecting overall private home rents - including landed and non-landed homes - to register a marginal rise of 1-3 per cent by the fourth quarter of 2018.

ZACD Group executive director Nicholas Mak believes the market will be able to absorb the upcoming supply of newly completed homes. For 2018 and 2019, the supply of newly completed homes is expected to be up to 14,600 units.

"On average, the future annual supply is about 8,300 units per year. This forms less than half of the annual supply of newly completed homes in the five-year period from 2013 to 2017," Mr Mak said. His rental forecasts for private homes and HDB flats are a decline of 1-2 per cent and 3-4 per cent, respectively, for the whole of this year.

Though vacancy rates have fallen from the last peak of 8.9 per cent in Q2 2016, they remained relatively elevated at 8.4 per cent as at Q3 2017, compared to the average of about 6.5 per cent in the past decade. As at Q3 2017, there were more than 30,000 vacant private housing units.

Savills Singapore research head Alan Cheong said he is expecting rents in the CCR to remain flat while that in the RCR and OCR to soften by another 3 per cent this year.

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