Analysts expect private home rentals to fall in Q1

Some analysts expect rentals of private homes in Singapore to fall for the second straight quarter ending in March this year, as a higher supply of new projects is expected to come on stream.

Chesterton Singapore estimates that overall rentals could fall by 0.5 to 1 per cent in the first quarter.

This comes after rentals slipped 0.5 per cent in the last quarter of 2013, the first decline in four years.

Analysts said investors hoping to lease their private residential units in Singapore may find it increasingly challenging as newer projects become available.

Based on its estimates, Chesterton Singapore said an average of 22,000 new units are likely to be completed each year for the next three years.

That is a lot higher than the 10,497 units in 2013 and 10,946 units in 2012.

The strong supply of new homes could see pressure on rentals, especially in the suburban areas, in the next 12 months.

Donald Han, managing director of Chesterton Singapore, said: “Total rents have actually gone up in the last four years for the core central region by about 25 per cent. If you look at the rest of central region, rents have gone up by 26 per cent, and if you look at outside core central region (OCR), rents went up in total 29 per cent.

“We will see a higher decrease in terms of rental prediction for OCR, where there is a larger… supply coming up in the next 12 months. Probably we would expect rentals to drop by about 5 to 8 per cent.”

Meanwhile, for high-end apartments in the prime districts of 9 and 10, Marina Bay and Sentosa Cove areas, market watchers expect rentals to be fairly resilient.

But larger units spanning over 2,000 to 4,000 square feet may take a longer time to find tenants as rentals are more expensive.

Juliann Teo, head of residential leasing at Jones Lang LaSalle, said: “There is a big range, from S$5.50 all the way to S$8; sometimes the smaller units command higher than S$8 per square foot.

“We see them softening, but being luxury apartments, they always have a certain X-factor. When they are developed, there are characteristics that will appeal to tenants.

“While we see there is some declining trend, but because of these factors that the property holds, we see the rentals holding fairly well for luxury projects.”

According to the Urban Redevelopment Authority, in the fourth quarter of 2013, mass market homes led the decline in rentals, falling by 0.8 per cent. Meanwhile, rentals in the core central region were down 0.5 per cent, followed by a 0.1 per cent decline for city fringe rentals.

Some observers expect this trend to be mirrored in the first three months of 2014.

They said it is a bit of a tenant’s market right now and landlords should try to renew the lease where possible, rather than look for a new tenant.

Chesterton Singapore said it could take up to two months to rent out a unit now, compared to a couple of weeks previously.

Source : Channel NewsAsia – 24 Mar 2014

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